Best 177 quotes of Seth Klarman on MyQuotes

A commodity doesn't have the same characteristics as a security, characteristics that allow for analysis. Other than a recent sale or appreciation due to inflation, analyzing the current or future worth of a commodity is nearly impossible.

All an investor can do is follow a consistently disciplined and rigorous approach; over time the returns will come

All investors must come to terms with the relentless continuity of the investment process.

Almost no one will accept responsibility for his or her role in precipitating a crisis: not leveraged speculators, not willfully blind leaders of financial institutions, and certainly not regulators, government officials, ratings agencies or politicians.

Always look for forced urgent selling.

Always remembering that we might be wrong, we must contemplate alternatives, concoct hedges, and search vigilantly for validation of our assessments. We always sell when a security's price begins to reflect full value, because we are never sure that our thesis will be precisely correct.

A margin of safety is achieved when securities are purchased at prices sufficiently below underlying value to allow for human error, bad luck, or extreme volatility in a complex, unpredictable and rapidly changing world.

Analysts recommendations may not produce good results. In part this is due to the pressure placed on these analysts to recommend frequently rather than wisely.

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.

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.

A simple rule applies: if you don't quickly comprehend what a company is doing, then management probably doesn't either.

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.

At Baupost, we constantly ask: 'What should we work on today?' We keep calling and talking. We keep gathering information. You never have perfect information. So you work, work and work. Sometimes we thumb through ValuLine. How you fill your inbox is very important.

At equal returns, public investments are generally superior to private investments not only because they are more liquid but also because amidst distress, public markets are more likely than private ones to offer attractive opportunities to average down.

At the worst possible moment, when your fund is down because cheap things have gotten cheaper, you need to have capital, to have clients who will actually love the phone call and-most of the time, if not all the time-add, rather than subtract, capital.

A value strategy is of little use to the impatient investor since it usually takes time to pay off.

Avoiding where others go wrong is an important step in achieving investment success. In fact, it almost assures it.

Avoid organizing investment team into silos.

Bad things happen, but really bad things do not. Do buy the dips, especially the lowest quality securities when they come under pressure, because declines will quickly be reversed.

Because investors are not usually penalized for adhering to conventional practices, doing so is the less professionally risky strategy, even though it virtually guarantees against superior performance.

Be focused on process and not outcome

Be indifferent if you lose your short term clients, remember they are your own worst enemy

Below, we itemize some of the quite different lessons investors seem to have learned as of late 2009 - false lessons, we believe. To not only learn but also effectively implement investment lessons requires a disciplined, often contrary, and long-term-oriented investment approach. It requires a resolute focus on risk aversion rather than maximizing immediate returns, as well as an understanding of history, a sense of financial market cycles, and, at times, extraordinary patience.

Be sure that you are well compensated for illiquidity - especially illiquidity without control - because it can create particularly high opportunity costs.

Beware leverage in all its forms. Borrowers - individual, corporate, or government - should always match fund their liabilities against the duration of their assets. Borrowers must always remember that capital markets can be extremely fickle, and that it is never safe to assume a maturing loan can be rolled over. Even if you are unleveraged, the leverage employed by others can drive dramatic price and valuation swings; sudden unavailability of leverage in the economy may trigger an economic downturn.

Buying's easier, selling's hard - [it's] hard to know when to get out.

By investing at a discount, Benjamin Graham knew that he was unlikely to experience losses.

Complexity - limits competition.

Do not accept principal risk while investing short-term cash: the greedy effort to earn a few extra basis points of yield inevitably leads to the incurrence of greater risk, which increases the likelihood of losses and severe illiquidity at precisely the moment when cash is needed to cover expenses, to meet commitments, or to make compelling long-term investments.

Do not suffer interim losses, relish and appreciate them

Do not trust financial market risk models. Despite the predilection of some analysts to model the financial markets using sophisticated mathematics, the markets are governed by behavioral science, not physical science.

Don't short many stocks. Instead they hedge for tail risk with CDS and options. They are happy to incur illiquidity

Excess capacity in people, machines, or property will be quickly absorbed.

Financial innovation can be highly dangerous, though almost no one will tell you this. New financial products are typically created for sunny days and are almost never stress-tested for stormy weather. Securitization is an area that almost perfectly fits this description; markets for securitized assets such as subprime mortgages completely collapsed in 2008 and have not fully recovered. Ironically, the government is eager to restore the securitization markets back to their pre-collapse stature.

Flexible approach - will look at ALL asset classes.

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.

Generally, the greater the stigma or revulsion, the better the bargain.

Gold is unique because it has the age-old aspect of being viewed as a store of value. Nevertheless, it’s still a commodity and has no tangible value, and so I would say that gold is a speculation. But because of my fear about the potential debasing of paper money and about paper money not being a store of value, I want some exposure to gold.

Graham's wonderful sentence as, an investor needs only two things: cash and courage. Having only one of them is not enough.

Great investments don't just knock on the door and say "buy me".

Having clients with a long-term orientation is crucial. Nothing else is as important to the success of an investment firm.

Having great clients is the key to investment success.

Hold cash when opportunities are not presenting themselves.

I don't have a Bloomberg on my desk. I don't care.

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.

If you are predisposed to be patient, disciplined and psychologically appreciate the idea of buying bargains, then you're likely to be good at it. If you have a need for action, if you want to be involved in the new and exciting technological breakthroughs of our time, that's great, but you're not a value investor, and you shouldn't be one.

If you can remember that stocks aren't pieces of paper that gyrate all the time --they are fractional interests in businesses -- it all makes sense.

If you've just stared into the abyss, quickly forget it: the lessons of history can only hold you back.

I know of no long-time practitioner who regrets adhering to a value philosophy; few investors who embrace the fundamental principles ever abandon this investment approach for another

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.