Seth Klarman Quotes - Page 3

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It is important to remember that value investing is not a perfect science. It is an, with an ongoing need for judgment, refinement, patience, and reflection. It requires endless curiosity, the relentless pursuit of additional information, the raising of questions, and the search for answers. It necessitates dealing with imperfect information - knowing you will never know everything and that that must not prevent you from acting. It requires a precarious balance between conviction, steadfastness in the face of adversity, and doubt - keeping in mind the possibility that you could be wrong.

Seth Klarman

Adversity, Reflection, Knowing

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If only one word is to be used to describe what Baupost does, that word should be: 'Mispricing'. We look for mispricing due to over-reaction.

Seth Klarman

Looks, Investing, Doe

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Value investing is predicated on the efficient market hypothesis being wrong.

Seth Klarman

Investing, Hypothesis, Efficient

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Interestingly, we have beaten the market quite handsomely over this time frame, although beating the market has never been our objective. Rather, we have consistently tried not to lose money and, in doing so, have not only protected on the downside but also outperformed on the upside.

Seth Klarman

Insightful, Investing, Protected

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Warren Buffett is right when he says you should invest as if the market is going to be closed for the next five years. The fundamental principles of value investing, if they make sense to you, can allow you to survive and prosper when everyone else is rudderless. We have a proven map with which to navigate. It sounds kind of crazy, but in times of turmoil in the market. I’ve felt a sort of serenity in knowing that if I’ve checked and rechecked my work, one plus one still equals two regardless of where a stock trades right after I buy it.

Seth Klarman

Crazy, Years, Two

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Selling, in particular, can be a challenge; many investors are tempted to become more optimistic when a security is performing well. This temptation must be resisted; tax considerations aside, when a security reaches full valuation, there is no longer a reason to own it.

Seth Klarman

Optimistic, Temptation, Challenges

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Macro worries are like sports talk radio. Everyone has a good opinion which probably means that none of them are good.

Seth Klarman

Sports, Mean, Worry

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The inability to hold cash and the pressure to be fully invested at all times meant that when the plug was pulled out of the tub, all boats dropped as the water rushed down the drain.

Seth Klarman

Water, Cash, Tubs

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The avoidance of loss is the surest way to ensure a profitable outcome.

Seth Klarman

Loss, Outcomes, Way

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While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.

Seth Klarman

Philosophy, Intelligent, Long

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When all feels calm and prices surge, the markets may feel safe; but, in fact, they are dangerous because few investors are focusing on risk.

Seth Klarman

Risk, May, Safe

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Almost every financial blow up is because of leverage.

Seth Klarman

Blow, Financial

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In a crisis, stocks of financial companies are great investments, because the tide is bound to turn. Massive losses on bad loans and soured investments are irrelevant to value; improving trends and future prospects are what matter, regardless of whether profits will have to be used to cover loan losses and equity shortfalls for years to come.

Seth Klarman

Loss, What Matters, Years

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The prevailing view has been that the market will earn a high rate of return if the holding period is long enough, but entry point is what really matters.

Seth Klarman

Views, Long, Matter

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Unlike return, however, risk is no more quantifiable at the end of an investment that it was at its beginning. Risk simply cannot be described by a single number. Intuitively we understand that risk varies from investment to investment: a government bond is not as risky as the stock of a high-technology company. But investments do not provide information about their risks the way food packages provide nutritional data.

Seth Klarman

Technology, Government, Data

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As Graham, Dodd and Buffett have all said, you should always remember that you don't have to swing at every pitch. You can wait for opportunities that fit your criteria and if you don't find them, patiently wait. Deciding not to panic is still a decision.

Seth Klarman

Opportunity, Swings, Decision

"Channeling Graham and Dodd: A Conversation with Seth Klarman". Value Investor Insight Interview, seekingalpha.com. October 29, 2008.

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To achieve long-term success over many financial market and economic cycles, observing a few rules is not enough. Too many things change too quickly in the investment world for that approach to succeed. It is necessary instead to understand the rationale behind the rules in order to appreciate why they work when they do and don't when they don't.

Seth Klarman

Order, Long, Appreciate

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Things that have never happened before are bound to occur with some regularity. You must always be prepared for the unexpected, including sudden, sharp downward swings in markets and the economy. Whatever adverse scenario you can contemplate, reality can be far worse.

Seth Klarman

Reality, Swings, Unexpected

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Pressure to produce over the short term - a gun to the head of everyone - encourages excessive risk taking which manifests itself in several ways - fully invested posture at all times, the use of leverage, and a market centric orientation that makes it difficult to stand apart from the crowd and take a long term perspective.

Seth Klarman

Gun, Perspective, Long

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As value investors, our business is to buy bargains that financial market theory says do not exist. We've delivered great returns to our clients for a quarter century-a dollar invested at inception in our largest fund is now worth over 94 dollars, a 20% net compound return. We have achieved this not by incurring high risk as financial theory would suggest, but by deliberately avoiding or hedging the risks that we identified.

Seth Klarman

Risk, Return, Clients

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Successful investors like stocks better when they’re going down. When you go to a department store or a supermarket, you like to buy merchandise on sale, but it doesn’t work that way in the stock market. In the stock market, people panic when stocks are going down, so they like them less when they should like them more. When prices go down, you shouldn’t panic, but it’s hard to control your emotions when you’re overextended, when you see your net worth drop in half and you worry that you won’t have enough money to pay for your kids’ college.

Seth Klarman

Kids, Successful, College

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Investors should always keep in mind that the most important metric is not the returns achieved but the returns weighed against the risks incurred. Ultimately, nothing should be more important to investors than the ability to sleep soundly at night.

Seth Klarman

Sleep, Night, Risk

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To value investors the concept of indexing is at best silly and at worst quite hazardous. Warren Buffett has observed that "in any sort of a 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 shortsighted.

Seth Klarman

Believe, Silly, Lazy

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Frequent comparative ranking can only reinforce a short-term investment perspective. It is understandably difficult to maintain a long-term view when, faced with the penalties for poor short-term performance, the long-term view may well be from the unemployment line ... Relative-performance-oriented investors really act as speculators. Rather than making sensible judgments about the attractiveness of specific stocks and bonds, they try to guess what others are going to do and then do it first.

Seth Klarman

Views, Perspective, Long

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There are only a few things investors can do to counteract risk: diversify adequately, hedge when appropriate, and invest with a margin of safety. It is a precisely because we do not and cannot know all the risks of an investment that we strive to invest at a discount. The bargain element helps to provide a cushion for when things go wrong.

Seth Klarman

Safety, Risk, Investing

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Born: May 21, 1957
Occupation: Author
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