Seth Klarman Quotes
373 Seth Klarman Quotes
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Yet high uncertainty is frequently accompanied by low prices. By the time the uncertainty is resolved, prices are likely to have risen.
Seth Klarman
It is often said on Wall St that there are many reasons why an insider might sell a stock (need for cash to pay taxes; expenses etc), but there is only one reason for buying.
Seth Klarman
In fact, often there is not immediate buying opportunity; today’s research may be advance preparation for tomorrow’s opportunities.
Seth Klarman
And investment program will not long succeed if high-quality research is not performed on a continuing basis.
Seth Klarman
Because other investors disparage [Have low opinion of] and avoid them, corporate liquidations may be particularly attractive opportunities for value investors.
Seth Klarman
As with any value investment, the greater the undervaluation, the great the margin of safety to investors.
Seth Klarman
Not all complex securities are worthwhile investments. They may be overpriced or too difficult to evaluate. Nevertheless this area frequently is fertile ground for bargain hunting by value investors.
Seth Klarman
Risk arbitrage is a highly specialised area of value investing. Arbitrage is a riskless transaction that generates profits from temporary pricing inefficiencies between markets. Risk arbitrage, however, involves investing in far from riskless takeover transactions. Spin offs, liquidations, and corporate restructures, which are sometimes referred to as long-term arbitrage, also fall into this category. Profit or loss depends much on the successful completion of a business transaction.
Seth Klarman
Opportunity exists in part because the complexity of the required analysis limits the number of capable participants. Further, risk arbitrage investments which offer returns that generally are unrelated to the performance of the overall market, are incompatible with the goals of relative-performance-oriented investors. Since the great majority of investors avoid risk arbitrage investing, there is a significant likelihood that attractive returns will be attainable for the handful who are able and willing to preserve.
Seth Klarman
Spinoffs often present attractive opportunities for value investors.
Seth Klarman
Index funds will sell (spinoffs) regardless of price if the spinoff is not a member of their assigned index.
Seth Klarman
A simple rule applies: if you don’t quickly comprehend what a company is doing, then management probably doesn’t either.
Seth Klarman
More significantly, they illustrate the way the herd mentality of investors can cause all companies in an out-of-favour industry, however disparate, to be tarred with the same brush.
Seth Klarman
Only a number of professional investors persisted in identifying this source of value-investment opportunities and understanding the reasons for it’s existence over a number of years.
Seth Klarman
Financially distressed and bankrupt securities are analytically complex and often illiquid.
Seth Klarman
Identifying attractive opportunities requires painstaking analysis; investors may evaluate dozens of situations to uncover a single worthwhile opportunity.
Seth Klarman
When properly implemented, troubled-company investing may entail less risk than traditional investing, yet offer significantly higher returns. When badly done, the results of investing in distressed and bankrupt securities can be disastrous; junior securities for example can be completely wiped out.
Seth Klarman
Many things can go wrong, with bankruptcy investments.
Seth Klarman
Since no investor is infallible and not investment is perfect, there is considerable merit in being able to change one’s mind.
Seth Klarman
When the securities in a portfolio frequently turn into cash, the investor is constantly challenged to put that cash to work, seeking out the best values available.
Seth Klarman
My view is that an investor is better off knowing a lot about a few investments than knowing a little about each of a great many holdings. One’s very best idea’s are likely to generate higher returns for a given level of risk than one’s hundredth or thousandth best idea.
Seth Klarman
Investment opportunity is a function of price, which is established in the marketplace.
Seth Klarman
A value investor does not get up in the morning knowing his or her buy and sell orders for the day,; these will be determined in the context of the prevailing prices and an ongoing assessment of underlying values.
Seth Klarman
Since transacting at the right price is critical, trading is central to value-investment success. This does not mean that trading in and of itself is important; trading for it’s own sake is at best a distraction and at worst a costly digression from an intelligent and disciplined investment program.
Seth Klarman
The best opportunities arise when other investors act unwisely thereby creating rewards for those who act intelligently. When others are willing to overpay for a security, they allow value investors to sell at premium prices or sell short at overvalued levels. When others panic and sell at prices far below underlying business value, they create buying opportunities for value investors.
Seth Klarman
Investors who are out of touch with the markets will find it difficult to be in touch with buying and selling opportunities regularly created by the markets.
Seth Klarman
Being in touch with the market does pose dangers, however. Investors can become obsessed for example with every market uptick and downtick and eventually succumb to short-term trading. There is a tendency to be swayed by recent market action, going with the herd rather than against it.
Seth Klarman
The most crucial factor in trading is developing the appropriate reaction to price fluctuations. Investors must learn to resist fear, the tendency to panic when prices are falling, and greed, the tendency to become overly enthusiastic when prices are rising. One half of trading involves learning to buy. In my view, investors should usually refrain from purchasing a ‘full position’ (the maximum dollar commitment they intend to make) in a given security all at once. Those who fail to heed this advice may be compelled to watch a subsequent price decline helplessly, with no buying power in reserve. Buying a partial position leaves reserves that permit investors to ‘average down’, lowering their average cost per share, if prices decline.
Seth Klarman
Evaluating your own willingness to average down can help you distinguish prospective investments from speculations. If the security you are considering is truly a good investment, not a speculation, you certainly want to own more at lower prices. If, prior to purchase you realise that you are unwilling to average down then you probably should not make the purchase in the first place.
Seth Klarman
Many investors are able to spot a bargain but have a harder time knowing when to sell. One reason is the difficulty of knowing precisely what an investment is worth. An investors buys with a range of value in mind at a price that provides a considerable margin of safety. As the market price appreciates, however, that safety margin decreases; the potential return diminishes, and the downside risk increases. Not knowing the exact value of the investment, it is understandable that an investor cannot be as confident in the sell decision as he or she was in the purchase decision.
Seth Klarman
Still others set sale price targets at the time of purchase, as if nothing that took place in the interim could influence the decision to sell. None of these rules makes good sense. Indeed there is only one valid rule for selling: all investments are for sale at the right price.
Seth Klarman
Decisions to sell, like decisions to buy, must be based upon underlying business value. Exactly when to sell or buy depends on the alternative opportunities that are available. Should you hold for a partial or complete value realisation for example? It would be foolish to hold out for an extra fraction of a point of gain in a stock selling just below underlying value when the market offers many bargains. By contrast, you would not want to sell a stock at a gain (and pay taxes on it) if it were still significantly undervalued and if there were no better bargains available.
Seth Klarman
Some investors place stop-loss orders to sell securities at specific prices, usually marginally below their cost. If prices rise, the orders are not executed. If the prices decline a bit, presumably on the way to a steeper fall, the stop-loss orders are executed. Although this strategy may seem an effective way to limit downside risk, it is in fact crazy. Instead of taking advantage of market dips to increase one’s holdings, a user of this technique acts as if the market knows the merits of a particular investment better than he or she does.
Seth Klarman
Liquidity considerations are also important in the decision to sell. For many securities the depth of the market as well as the quoted price is an important consideration. You cannot sell, after all in the absence of a willing buyer; the likely presence of a buyer must therefore be a factor in the decision to sell.
Seth Klarman
If selling still seems difficult for investors who follow a value-investment philosophy, I offer the following rhetorical questions: If you haven’t bought based on underlying value, how do you decide when to sell? If you are speculating in securities above underlying value, when do you take a profit or cut your losses? Do you have any guide other than ‘how they are acting’ which is really no guide at all?
Seth Klarman
It is helpful to recognise that there are cycles of investment fashion.
Seth Klarman
The lessons of history keep repeating every day.
Seth Klarman
It is hard to measure (the success of) philanthropy.
Seth Klarman
People want something more they can’t get.
Seth Klarman
Investing is the intersection of economics and psychology.
Seth Klarman
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