Seth Klarman Quotes
373 Seth Klarman Quotes (Baupost)
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Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.
Seth Klarman
Avoiding where others go wrong is an important step in achieving investment success.
Seth Klarman
Individual and institutional investors alike frequently demonstrate an inability to make long-term investment decisions based on business fundamentals.
Seth Klarman
Investment success cannot be captured in a mathematical equation or a computer program.
Seth Klarman
The focus of most investors differs from that of value investors. Most investors are primarily oriented toward return, how much they can make and pay little attention to risk, how much they can lose.
Seth Klarman
A margin of safety is necessary because valuation is an imprecise art, the future is unpredictable, and investors are human and do make mistakes. It is adherence to the concept of a margin of safety that best distinguishes value investors from all others, who are not as concerned about loss.
Seth Klarman
As Buffett has often observed, value investing is not a concept that can be learned and gradually applied over time. It is either absorbed and adopted at once, or it is never truly learned.
Seth Klarman
Once you adopt a value-investment strategy, any other investment behaviour starts to seem like gambling.
Seth Klarman
Investors buy securities that appear to offer attractive return for the risk incurred and sell when the return no longer justifies the risk.
Seth Klarman
Investors believe that over the long run security prices tend to reflect fundamental developments involving the underlying businesses.
Seth Klarman
Speculators are obsessed with predicting-guessing-the direction of stock prices. Every morning on cable television, every afternoon on the stock market report, every weekend in Barron’s, every week in dozens of market newsletters, and whenever business people get together.
Seth Klarman
In reality, no one knows what the market will do; trying to predict it is a waste of time, and investing based upon that prediction is a speculative undertaking.
Seth Klarman
Successful investors tend to be unemotional, allowing the greed and fear of others to play into their hands. By having confidence in their own analysis and judgement, they respond to market forces not with blind emotion but with calculated reason. Successful investors, for example, demonstrate caution in frothy markets and steadfast conviction in panicky ones. Indeed, the very way an investor views the market and it’s price fluctuations is a key factor in his or her ultimate investment success or failure.
Seth Klarman
Yet if the security were truly a bargain when it was purchased, the rational course of action would be to take advantage of this even better bargain and buy more.
Seth Klarman
You cannot ignore the market – ignoring a source of investment opportunities would obviously be a mistake – but you must think for yourself and not allow the market to direct you.
Seth Klarman
Value in relation to price, not price alone, must determine your investment decisions. If you look to Mr Market as a creator of investment opportunities (where price departs from underlying value), you have the makings of a value investor. If you insist on looking to Mr Market for investment guidance however, you are probably best advised to hire someone else to manage your money.
Seth Klarman
Supply and demand imbalances can result from year end tax selling, an institutional stampede out of a stock that just reported disappointing earnings, or an unpleasant rumour.
Seth Klarman
Investors will frequently not know why security prices fluctuate.
Seth Klarman
Many investors greedily persist in the investment world’s version of a search for the holy grail: the attempt to find a successful investment formula. It is human nature to seek simply solutions to problems, however complex.
Seth Klarman
When a Wall Street analyst or broker expresses optimism, investors must take it with a grain of salt.
Seth Klarman
Wall Street research is strongly oriented toward buy rather than sell recommendations. There is more business to be done by issuing an optimistic research report than by writing a pessimistic one.
Seth Klarman
The problem is that with so much attention being paid to the upside, it is easy to lose sight of the risk.
Seth Klarman
Overvaluation is not always apparent to investors, analysts, or managements. Since security prices reflect investors’ perception of reality and not necessarily reality itself, overvaluation may persist for a long time.
Seth Klarman
Financial market innovations are good for Wall St but bad for clients.
Seth Klarman
The value of a company selling a trendy product, such as television shopping, depends on the profitability of the product, the product lifecycle, competitive barriers, and the ability of the company to replicate it’s current success.
Seth Klarman
There will always be cycles of investment fashion and just as surely investors who are susceptible to them.
Seth Klarman
In 40 years [1950-1990] the share of institutional ownership in all publicly traded US equity securities increased from 8% to 45%.
Seth Klarman
Today institutional investors dominate the financial markets accounting for roughly ¾ of stock exchange trading volume. All investors are affected by what the institutions do, owning to the impact of their enormous financial clout on security prices. Understanding their behaviour is helpful in understanding why certain securities are overvalued while others are bargain priced and may enable investors to identify areas of potential opportunity.
Seth Klarman
It is worth noting that few institutional money managers invest their own money along with their clients’ funds. The failure to do so frees these manager to single-mindedly pursue their firms’, rather than their clients’ best interests.
Seth Klarman
An investor’s time is required both to monitor current holdings and to investigate potential new investments.
Seth Klarman
In addition to the influences of the investment business, money managers (institutional) despite being professionals frequently fall victim to the same forces that operate on individual investors: the greedy search for quick and easy profits, the comfort of consensus, the fear of falling prices, and all the others. The twin burdens of institutional baggage and human emotion can be difficult to overcome.
Seth Klarman
The return per dollar invested declines as total assets increase. The principal reason is that good investment ideas are in short supply.
Seth Klarman
The flexibility of institutional investors is frequently limited by a self-imposed requirement to be fully invested at all times. Many institutions interpret their task as stock picking, not market timing; they believe that their clients have made the market timing decision and pay them to fully invest all funds under their management.
Seth Klarman
Being fully invested at all times will at best generate mediocre returns; at worst they entail both a high opportunity cost – foregoing the next good opportunity to invest – and the risk of appreciable loss.
Seth Klarman
Neither the stock nor the bond market is infinitely deep. Vast sums cannot be instantaneously switched from one area to the other without moving the markets and incurring considerable transaction costs as well.
Seth Klarman
By contrast value investing is predicated on the belief that the financial markets are not efficient. Value investors believe that stock prices depart from underlying value and that investors can achieve above-market returns by buying undervalued securities. To value investors the concept of indexing is at best silly and at worst quite hazardous. Warren Buffett has observed that I ‘in any sort of contest – financial, mental or physical – it’s an enormous advantage to have opponents who have been taught that it’s useless to even try.’ I believe that over time value investors will outperform the market and that choosing to match it is both lazy and short sighted.
Seth Klarman
Investors must try to understand the institutional investment mentality for two reasons. First institutions dominate financial market trading; investors who are ignorant of institutional behaviour are likely to be periodically trampled. Second, ample investment opportunities may exist in the securities that are excluded from consideration by most institutional investors. Picking through the crumbs left by the investment elephants can be rewarding. Investing without understanding the behaviour of institutional investors is like driving in a foreign land without a map. You may eventually get where you are going, but the trip will certainly take longer, and you risk getting lost along the way.
Seth Klarman
[Junk Bonds] Early investors did well, emboldening others; subsequent deals were performed at still higher multiples of earnings and cashflow.
Seth Klarman
Without high-priced takeovers there were no upfront investment banking fees, no underwriting fees on new junk-bond issues, and no management fees on junk-bond portfolios. This would not be the first time on Wall Street that the means were adapted to justify the end. If a historically accepted investment yardstick proves to be overly restrictive, the path of least resistance is to invent a new standard.
Seth Klarman
Predicably these studies used a historical default-rate analysis and neglected to consider the implications of either a prolonged economic downturn or a credit crunch that might virtually eliminate refinancings.
Seth Klarman
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