Seth Klarman is the head of the Baupost Group, a Boston-based private investment partnership. He was born on May 21, 1957 and is widely regarded as one of the top Value Investors and has been compared to legendary investors like Warren Buffett because of his patient and disciplined approach to investing.
Seth Klarman’s “Margin of Safety” Book
Back in 1991 he wrote a book called “Margin of Safety” copies of which have sold for as much as $3,000 due to the fact that there have been no reprints and original copies remain very hard to get.
The Top 20 Investing Lessons From Seth Klarman
As Value Theory reminds us, this book is packed with knowledge and wisdom about value investing and the world ion general. Here are the top 20 lessons drawn from his work:
1. People should be highly skeptical of anyone’s including their own, ability to predict the future, and instead pursue strategies that can survive whatever may occur.
2. The single greatest edge an investor can have is a long-term orientation.
3. Over the long run, the crowd is always wrong.
4. Once you adopt a value investment strategy, any other investment behavior starts to seem like gambling.
5. Ultimately, nothing should be more important to investors than the ability to sleep soundly at night.
6. Investing is the intersection of economics and psychology.
7. Loss avoidance must be the cornerstone of your investment philosophy.
8. Never stop reading. History doesn’t repeat, but it does rhyme.
9. The near absence of bargains works as a reverse indicator for us. When we find there is little worth buying, there is probably much worth selling.
10. Be focused on process and not outcome.
11. In investing it is never wrong to change your mind. It is only wrong to change your mind and do nothing about it.
12. While others attempt to win every lap around the track, it is crucial to remember that to succeed at investing, you have to be around at the finish.
13. Much investing success comes down to discipline and patience.
14. Value investors have to be patient and disciplined, but what I really think is you need not to be greedy. If you’re greedy and you leverage, you blow up. Almost every financial blow up is because of leverage.
15. 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.
16. Hold cash when opportunities are not presenting themselves.
17. I think markets will never be efficient because of human nature.
18. When a Wall Street analyst or broker expresses optimism, investors must take it with a grain of salt.
19. Value investing is the discipline of buying shares at a significant discount, to their current underlying values. But also having the ability to hold them until more of their value is realized.
20. I find value investing to be a stimulating, intellectually challenging, ever changing, and financially rewarding discipline.