We worry top-down, but we invest bottom-up Seth Klarman More Quotes by Seth Klarman More Quotes From Seth Klarman Value investing is the discipline of buying shares at a significant discount from their current underlying values and holding them until more of their value is realised. The element of a bargain is the key to the process. Seth Klarman investing discipline keys A tipping point is invisible, as we just saw in Greece. In most situations, everything appears fine until it's not fine, until, for example, no one shows up at a Treasury auction. Seth Klarman tipping example auctions Never stop reading. History doesn't repeat, but it does rhyme. Seth Klarman rhyme reading doe One thing I want to emphasize is that, like any human being, we can discuss our view of the economy and the market. Fortunately for our clients, we don't tend to operate based on the view. Our investment strategy is to invest bottom up, one stock at a time, based on price compared to value. And while we may have a macro view that things aren't very good right now - which in fact we feel very strongly we will put money to work regardless of that macro view if we find bargains. So tomorrow, if we found half a dozen bargains, we would invest all our cash. Seth Klarman clients views facts Costs and liabilities are rarely overstated. Seth Klarman liability cost 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 swings unexpected reality The way to maximize outcome is to focus on the process. Seth Klarman outcomes focus way In the financial markets, however, the connection between a marketable security and the underlying business is not as clear-cut. For investors in a marketable security the gain or loss associated with the various outcomes is not totally inherent in the underlying business; it also depends on the price paid, which is established by the marketplace. The view that risk is dependent on both the nature of investments and on their market price is very different from that described by beta. Seth Klarman cutting views loss Once you adopt a value-investment strategy, any other investment behavior starts to seem like gambling. Seth Klarman investment strategy gambling Flexible approach - will look at ALL asset classes. Seth Klarman assets class looks Hold cash when opportunities are not presenting themselves. Seth Klarman presenting cash opportunity A value strategy is of little use to the impatient investor since it usually takes time to pay off. Seth Klarman use littles pay The strategy of buying what's in favor is a fool's errand, ensuring long-term underperformance. Only by standing against the prevailing winds - selectively, but resolutely - can an investor prosper over time. But for a while, a value investor typically underperforms. Seth Klarman errands wind long Why should the immediate opportunity set be the only one considered, when tomorrow's may well be considerably more fertile than today's? Seth Klarman may opportunity today 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. Seth Klarman appreciate ideas needs Be focused on process and not outcome Seth Klarman focused outcomes process Complexity - limits competition. Seth Klarman complexity competition limits 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. Seth Klarman dip quality pressure We don't deal in absolutes. We deal in probabilities. Seth Klarman probability absolutes deals 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. Seth Klarman fickle swings government
