"Every Stock can't become a Great Compounder because.." _ Mohnish Pabrai | Stocks | Compounding

Mohnish Pabrai, a well-known value investor, emphasizes the importance of focusing on great compounders rather than high-growth stocks. He believes that while growth stocks can offer short-term gains, long-term wealth is built by investing in companies with durable competitive advantages and strong free cash flow generation. Pabrai highlights that great compounders, even if they grow at a moderate pace, offer consistent returns through their ability to reinvest profits at high rates of return. He often advises patience, stating that holding onto these businesses over many years allows compounding to work its magic. In his view, investors should prioritize companies with strong fundamentals over those chasing rapid but unsustainable growth.

What is a great compounder? What is a growth stock?

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