Value investors should completely exit a security by the time it reaches full value; owning overvalued securities is the realm of speculators. Seth Klarman More Quotes by Seth Klarman More Quotes From Seth Klarman Investors need to pick their poison: Either make more money when times are good and have a really ugly year every so often, or protect on the downside and don't be at the party so long when things are good. Seth Klarman party long years Rather, risk is a perception in each investor's mind that results from analysis of the probability and amount of potential loss from an investment. If an exploratory oil well proves to be a dry hole, it is called risky. If a bond defaults or a stock plunges in price, they are called risky. But if the well is a gusher, the bond matures on schedule, and the stock rallies strongly, can we say they weren't risky when the investment after it is concluded than was known when it was made. Seth Klarman oil risk loss 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. Seth Klarman important perfect talking Investors should pay attention not only to whether but also to why current holdings are undervalued. It is critical to know why you have made an investment and to sell when the reason for owning it no longer applies. Look for investments with catalysts that may assist directly in the realization of underlying value. Give reference to companies having good managements with a personal financial stake in the business. Finally, diversify your holdings and hedge when it is financially attractive to do so. Seth Klarman good-man attention giving 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 lazy silly believe When a Wall Street analyst or broker expresses optimism, investors must take it with a grain of salt. Seth Klarman grain-of-salt optimism wall You need to balance arrogance and humilitywhen you buy anything, it's an arrogant act. You are saying the markets are gyrating and somebody wants to sell this to me and I know more than everybody else so I am going to stand here and buy it. I am going to pay an 1/8th more than the next guy wants to pay and buy it. That's arrogant. And you need the humility to say 'but I might be wrong.' And you have to do that on everything Seth Klarman arrogance guy humility All investors must come to terms with the relentless continuity of the investment process. Seth Klarman relentless investment process It's incredibly important to note that when you don't allow failure, you get more failure. Seth Klarman notes important I don't have a Bloomberg on my desk. I don't care. Seth Klarman desks i-dont-care care Don't short many stocks. Instead they hedge for tail risk with CDS and options. They are happy to incur illiquidity Seth Klarman cds risk tails Great investments don't just knock on the door and say "buy me". Seth Klarman investment doors Avoid organizing investment team into silos. Seth Klarman investment team Always look for forced urgent selling. Seth Klarman urgent selling looks We suppose that could be considered a hedged position for the awards committee, one that would never occur in the hard sciences such as physics and chemistry, where a prize shared among three with divergent views would be an embarrassing mistake or a bad joke. While a Nobel Prize might well be the culmination of a life’s work, shouldn’t the work accurately describe the real world? Seth Klarman awards real mistake Having great clients is the key to investment success. Seth Klarman investment-success clients keys Value investing by its very nature is contrarian. Seth Klarman investing values There is an old saying, "How did you go bankrupt?" And the answer is, "Gradually, and then suddenly." The impending fiscal crisis in the United States will make its appearance in the same way. Seth Klarman united-states answers way Courage is a function of process. Seth Klarman function process Right at the core, the mainstream has it backwards. Warren Buffett often quips that the first rule of investing is to not lose money, and the second rule is to not forget the first rule. Yet few investors approach the world with such a strict standard of risk avoidance. Seth Klarman investing risk world
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