Cloning and Tail Coat Investing and mental models

 I was just going through Mohnish Pabrai's old videos and I remember watching him talking about cloning, and tail coat investing. 

Cloning is copying the business models of successful companies. An example of a great business is the Moody's, S&P ratings business. Even though they gave toxic ratings that led to the collapse of the financial system in the last financial crisis, they are still extremely profitable and growing strongly.  Cloning is looking for a similar business in another country. or another rating agency in another country. A similar company to Moody's is CRISIL, in India, which operates a ratings agency.

The cost to operate a ratings agency may be just to hire some staff and they can charge a fortune to do  ratings for different companies. So there isn't a high capex requirement, like purchasing machinery and factories.

Here is the latest stock chart of CRISIL, Mohnish talked about this in 2016

Here is the stock chart of Moodys.

So even after identifying the moat of these 2 companies, the stock price, despite being at an elevated level, continues to rise. An example on a potential failure of this cloning is NICE Holdings in South Korea. However the ratings business is only one of many businesses NICE Holdings holds.

This is a mental model, the idea to shortcut the investment process by looking for successful investors(or business models) and copying what they are doing. This is finding great investments by following on the tail coats of successful investors. Mohnish Pabrai is one such investor. I have a bunch of other successful investors that I follow on youtube. Stanley Druckenmiller, Bill Ackman, Carl Icahn, Howard Marks, Phil Town, Prem Watsa, Joel Greenblatt and many other investors that I come across on youtube and over the net. The idea is to copy ideas while following other successful investors.

Another Cloning idea that I have is that of cloning Press Metals cheap electricity moat by looking at other companies operating in the Samalaju industrial park, where they benefit from cheap electricity, a favorable location near sea trade routes, a dedicated port as well as being in the SCORE(Sarawak Corridor of Renewable Energy).

Press Metals Stock Chart

OCIM, OM Holdings Bhd and Cahya Mata Phosphates being a few of clones of Samalaju industrial park. OCIM and Cahya Mata Phosphates are relatively big companies compared to their expansions in Samalaju. However I believe it won't be too late to invest into the companies after the expansions have proved themselves.