Seth Klarman Quotes
373 Seth Klarman Quotes
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There is a value gene. You simply get it or not.
Seth Klarman
Analysis is not that hard, but how much to buy, when to buy, knowing what to do, knowing when to sell when you have made a legitimate mistake is a harder thing and you can learn through experience when you have the right psychological makeup in the first place.
Seth Klarman
Buying is easier, selling is harder. You can never know how big a bargain you will get tomorrow. So always keep a little in reserve. Buying a dollar for 50 cents could become 40 cents tomorrow.
Seth Klarman
Don’t get into bed with bad people.
Seth Klarman
If you put clients first then they will do fine.
Seth Klarman
In contrast to the speculators preoccupation with rapid gain, value investors demonstrate their risk aversion by striving to avoid loss.
Seth Klarman
Losing money, as Graham noted, can also be psychologically unsettling. Anxiety from the financial damaged caused by recently experienced loss or the fear of further loss can significantly impede our ability to take advantage of the next opportunity that comes along. If an undervalued stock falls by half while the fundamentals – after checking and rechecking – are confirmed to be unchanged, we should relish the opportunity to buy significantly more ‘on sale’. But if our net worth has tumbled along with the share price, it may be psychologically difficult to add to the position.
Seth Klarman
While it might seem that anyone can be a value investor, the essential characteristics of this type of investor – patience, discipline and risk aversion – may be genetically determined. Either you are able to remain disciplined and patient, or you aren’t.
Seth Klarman
A value strategy is of little use to the impatient investor since it usually takes time to pay off.
Seth Klarman
Human nature never changes.
Seth Klarman
Only when they cannot find bargains should they default to holding cash.
Seth Klarman
While some value-oriented hedge funds and even endowments use leverage to enhance their returns, I side with those who are unwilling to incur the added risks that come with margin debt. Just as leverage enhances the return of successful investments, it magnifies the losses from unsuccessful ones. More importantly, non-recourse (margin) debt raises risk to unacceptable levels because it places one’s staying power in jeopardy.
Seth Klarman
One risk-related consideration should be paramount above all others: the ability to sleep well at night, confident that your financial position is secure whatever the future may bring.
Seth Klarman
[In December 1995.] Bulls will patiently explain that ‘it is different this time’, pointing to low inflation, high corporate profits, increased productivity, world peace (sort of), reductions in government spending, and the like. Of course, any contrarian knows that just as a grim present is usually precursor to a better future, a rosy present may be precursor to a bleaker tomorrow.
Seth Klarman
[In October 2008.] Value investing is at its core the marriage of a contrarian streak and a calculator.
Seth Klarman
[In December 1999.] It is always easiest to run with the herd; at times, it can take a deep reservoir of courage and conviction to stand apart from it. Yet distancing yourself from the crowd is an essential component of long-term investment success.
Seth Klarman
[In December 1999 on the internet bubble/dotcom boom.] At the root of all financial bubbles is a good idea carried to excess.
Seth Klarman
[In October 2007.] As value investors, our business is to buy bargains that financial market theory says do not exist.
Seth Klarman
[In October 2008.] A highly leveraged financial system is always to some degree a house of cards, vulnerable to a small crack in an obscure part of the foundation.
Seth Klarman
[In May 2010.] Never stop reading. History doesn’t repeat, but it does rhyme.
Seth Klarman
[In January 2013.] People should be highly skeptical of anyone’s, including their own, ability to predict the future, and instead pursue strategies that can survive whatever may occur.
Seth Klarman
[In January 2013.] In the financial markets, there is rarely anything new under the sun, but you can never say, you’ve seen it all, and what you thought would never see can clobber you.
Seth Klarman
[In January 2013.] Investing today may well be harder than it has been at any time in our three decades of existence, not because markets are falling but because they are rising; not because governments have failed to act but because they chronically overreact; not because we lack acumen or analytical tools, but because the range of possible outcomes remains enormously wide; and not because there are no opportunities, but because the underpinnings of our economy and financial system are so precarious that the inhabiting risks of collapse dwarf all other factors.
Seth Klarman
[In June 1990.] We try to buy dollars for 50 cents, and to realize the dollar before too much time passes. We look for catalysts that will promptly precipitate the realization of the underlying value in a stock or bond.
Seth Klarman
[In June 1990.] A dollar of value is not what a bunch of debt-financed maniacs might want to pay for something. The question we ask ourselves is, ‘What would we be willing to pay to own a security forever?’ Then we determine whether we can buy it at a discount from that figure.
Seth Klarman
[In June 1990 on United Foods a vegetable-processing company with a share price of $2.50 a book value of about $4.00 and having earned 63 cents a share in its last fiscal year.] How often can you buy a stock at four times earnings and two-thirds of book value?
Seth Klarman
[In November 1991 on buying his first share at 10 years of age.] I’ve always been interested in the market… I traded my first stock when I was 10… Johnson & Johnson… I bought one share. Completely as a surprise, it split 3 for 1 the next day.
Seth Klarman
[In November 1991 on whether he calls himself a hedge fund.] No. We do not. We are compensated somewhat like hedge funds but do not hedge in the sense of always being long and short. We tend to be long investors. We are rarely on the short side.
Seth Klarman
[In November 1991.] We formed a couple of different partnerships with somewhat different objectives. But there is one investment philosophy: value investing.
Seth Klarman
[In November 1991 on being asked how he did during stressful periods ‘such’ as 1987.] I would argue a little bit about the definition of stressful periods. Because I will tell you I get more stressed when the market is running up than when it is running down.
Seth Klarman
[In November 1991.] We tend to only make investments when we think there is a compelling opportunity being presented. And often we will hold a third or half in cash or even more, awaiting such opportunities.
Seth Klarman
[In November 1991.] When the market gets expensive, we tend to find fewer things. In 1987, we were between 40% and 50% in cash going into the Crash on October 19. That put us in the pleasant position of not getting too clobbered. Much of what we owned at the time was not in market-sensitive securities, either. If I remember correctly…
Seth Klarman
[In November 1991.] We define value investing as buying dollars for 50 cents…
Seth Klarman
[In November 1991.] Value to some extent is in the eye of the beholder. It is very hard to pin down what the value of a future set of cash flows from a business, be it cable TV or biotechnology, is going to be. Some are easier to predict than others. But it is very hard to predict what those future cash flows are going to be.
Seth Klarman
[In November 1991.] The more you get into businesses that depend on things going right in the future, the harder we find it to understand. So we tend to buy asset-rich businesses, very predictable businesses.
Seth Klarman
[In November 1991.] Often we do best in turbulent times, especially if we are fortunate enough to be holding cash going in. If you think of the stock market as a cauldron of minestrone soup that occasionally somebody sticks a ladle in and stirs up, it takes a while before all the vegetables float back to the level that they were at before.
Seth Klarman
[In November 1991 on the lowest cash position he has had in the eight plus years Baupost has been operating.] We came very close to being fully invested shortly after the ’87 Crash.
Seth Klarman
[In November 1991.] At some point caution may actually start to earn a return again. Meaning that the market may come down and vindicate those people.
Seth Klarman
[In November 1991.] Last fall, we identified a stock that traded at 8% of book value, one-fifth of net working capital per share, had virtually no debt, and positive cash flow. The name of this company is Esco Electronics. ESE. It trades on the NYSE… Esco was a spinoff from Emerson Electric.
Seth Klarman
[In November 1991 more on Esco.] There has also been insider buying, which is one of the things we look for… We imagine that if it came into favor the stock could double or triple or more. The key thing for us is we don’t think there is a lot of downside. Given the tangible assets, given the cash flow, we would be very surprised to lose money over a meaningful time frame here.
Seth Klarman
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