Top 100 Seth Klarman Quotes
#1. 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
#2. While knowing how to value businesses is essential for investment success, the first and perhaps most important step in the investment process is knowing where to look for opportunities
Seth Klarman
#4. When managers are afraid of redemptions, they get liquid. We all saw how many managers went from leveraged long in 2007 to huge net cash in 2008, when the right thing to do in terms of value would have been to do the opposite.
Seth Klarman
#5. I think Buffett is a better investor than me because he has a better eye toward what makes a great business. And when I find a great business I'm happy to buy it and hold it. Most businesses don't look so great to me.
Seth Klarman
#6. 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
#7. The government can indefinitely control both short-term and long-term interest rates.
Seth Klarman
#8. All an investor can do is follow a consistently disciplined and rigorous approach; over time the returns will come
Seth Klarman
#9. When a government official says a problem has been "contained," pay no attention.
Seth Klarman
#10. Ratings agencies are highly conflicted, unimaginative dupes. They are blissfully unaware of adverse selection and moral hazard. Investors should never trust them.
Seth Klarman
#12. The trick of successful investors is to sell when they want to, not when they have to.
Seth Klarman
#13. A value strategy is of little use to the impatient investor since it usually takes time to pay off.
Seth Klarman
#14. A simple rule applies: if you don't quickly comprehend what a company is doing, then management probably doesn't either.
Seth Klarman
#15. 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
#16. Costs and liabilities are rarely overstated.
Seth Klarman
#17. Value investing is predicated on the efficient market hypothesis being wrong.
Seth Klarman
#18. We are not so brazen as to believe that we can perfectly calibrate valuation; determining risk and return for any investment remains an art not an exact science
Seth Klarman
#19. 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
#20. In a rising market, everyone makes money and a value philosophy is unnecessary. But because there is no certain way to predict what the market will do, one must follow a value philosophy at all times.
Seth Klarman
#21. Many LBOs are man-made disasters. When the price paid is excessive, the equity portion of an LBO is really an out-of-the-money call option. Many fiduciaries placed large amounts of the capital under their stewardship into such options in 2006 and 2007.
Seth Klarman
#22. Great investments don't just knock on the door and say "buy me".
Seth Klarman
#23. I find value investing to be a stimulating, intellectually challenging, ever changing, and financially rewarding discipline
Seth Klarman
#24. We work really hard never to get confused with what we know from what we think or hope or wish.
Seth Klarman
#25. 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.
Seth Klarman
#26. Targeting investment returns leads investors to focus on potential upside rather on downside risk ... rather than targeting a desired rate of return, even an eminently reasonable one, investors should target risk.
Seth Klarman
#27. Sometimes buying early on the way down looks like being wrong, but it isn't.
Seth Klarman
#28. 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.
Seth Klarman
#29. Individual and institutional investors alike frequently demonstrate an inability to make long-term investment decisions based on business fundamentals.
Seth Klarman
#30. 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.
Seth Klarman
#31. 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.
Seth Klarman
#32. 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
#33. Depressions aren't good but the depression mentality is good.
Seth Klarman
#34. Avoiding where others go wrong is an important step in achieving investment success. In fact, it almost assures it.
Seth Klarman
#35. All investors must come to terms with the relentless continuity of the investment process.
Seth Klarman
#36. In investing it is never wrong to change your mind. It is only wrong to change your mind and do nothing about it.
Seth Klarman
#37. 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 act is still a decision.
Seth Klarman
#38. It sounds kind of crazy, but in times of turmoil in the market, I've felt a sort of serenity in knowing that I've checked and re-checked my work, one plus one still equals two regardless of where a stock trades right after I buy it.
Seth Klarman
#39. 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.
Seth Klarman
#40. Successful investors must temper the arrogance of taking a stand with a large dose of humility, accepting that despite their efforts and care, they may in fact be wrong.
Seth Klarman
#41. 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
#42. Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.
Seth Klarman
#43. The overwhelming majority of people are comfortable with consensus, but successful investors tend to have a contrarian bent,
Seth Klarman
#44. You need humility to say 'I might be wrong.'
Seth Klarman
#45. There's no such thing as a value company. Price is all that matters. At some price, an asset is a buy, at another it's a hold, and at another it's a sell.
Seth Klarman
#46. We buy expecting to hold a bond to maturity and a stock forever.
Seth Klarman
#48. 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.
Seth Klarman
#49. Risk is not inherent in an investment; it is always relative to the price paid. Uncertainty is not the same as risk. Indeed, when great uncertainty - such as in the fall of 2008 - drives securities prices to especially low levels, they often become less risky investments.
Seth Klarman
#50. 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.
Seth Klarman
#51. Buying's easier, selling's hard - [it's] hard to know when to get out.
Seth Klarman
#52. Most investors are primarily oriented toward return, how much they can make and pay little attention to risk, how much they can lose.
Seth Klarman
#53. The way to maximize outcome is to focus on the process.
Seth Klarman
#54. Macro worries are like sports talk radio. Everyone has a good opinion which probably means that none of them are good.
Seth Klarman
#55. Do not suffer interim losses, relish and appreciate them
Seth Klarman
#56. Flexible approach - will look at ALL asset classes.
Seth Klarman
#57. 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
#58. Never stop reading. History doesn't repeat, but it does rhyme.
Seth Klarman
#59. Ultimately, nothing should be more important to investors than the ability to sleep soundly at night.
Seth Klarman
#60. There is no amount of bad news that the markets cannot see past.
Seth Klarman
#61. 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.
Seth Klarman
#62. Having great clients is the key to investment success.
Seth Klarman
#63. 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.
Seth Klarman
#64. 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
#65. Almost every financial blow up is because of leverage,
Seth Klarman
#66. We are big fans of fear, and in investing it is clearly better to be scared than sorry.
Seth Klarman
#67. 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.
Seth Klarman
#68. 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
#69. We don't deal in absolutes. We deal in probabilities.
Seth Klarman
#70. If an asset has cash flow or the likelihood of cash flow in the near term and is not purely dependment on what a future buyer might pay, then it's an investment. If an asset's value is totally dependent on the amount a future buyer might pay, then its purchase is speculation.
Seth Klarman
#72. We worry top-down, but we invest bottom-up
Seth Klarman
#73. The government can reasonably rely on debt ratings when it forms programs to lend money to buyers of otherwise unattractive debt instruments.
Seth Klarman
#74. Warren Buffett once wrote that value investing is like an inoculation
it either takes or it doesn't
and when you explain to somebody what it is and how it works and why it works and show them the returns, either they get it or they don't.
Seth Klarman
#75. I don't have a Bloomberg on my desk. I don't care.
Seth Klarman
#76. To a value investor, investments come in three varieties: undervalued at one price, fairly valued at another price, and overvalued at still some higher price. The goal is to buy the first, avoid the second, and sell the third.
Seth Klarman
#77. 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
#78. 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.
Seth Klarman
#79. The cost of performing well in bad times can be relative underperformance in good times.
Seth Klarman
#80. Over the long run, the crowd is always wrong.
Seth Klarman
#81. Most institutional investors feel compelled to swing at almost every pitch and forgo batting selectivity for frequency.
Seth Klarman
#82. My view is that an investor is better off knowing a lot about a few investments than knowing a little about each of a great many holdings. One's very best idea's are likely to generate higher returns for a given level of risk than one's hundredth or thousandth best idea.
Seth Klarman
#83. In contrast to the speculators preoccupation with rapid gain, value investors demonstrate their risk aversion by striving to avoid loss.
Seth Klarman
#84. One must understand the importance of an endless drive to get information and seek value.
Seth Klarman
#85. You probably would not choose to dine at a restaurant whose chef always ate elsewhere. I do eat my own cooking, and I don't "dine out" when it comes to investing.
Seth Klarman
#86. When a stock is selling at a discount to liquidation value per share, a near rock-bottom appraisal, it is frequently an attractive investment.
Seth Klarman
#87. 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
Seth Klarman
#88. When people give away stocks based on forced selling or fear that is usually a great opportunity.
Seth Klarman
#89. Having clients with a long-term orientation is crucial. Nothing else is as important to the success of an investment firm.
Seth Klarman
#90. 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
#91. Be sure that you are well compensated for illiquidity - especially illiquidity without control - because it can create particularly high opportunity costs.
Seth Klarman
#92. One of the biggest challenges in investing is that the opportunity set available today is not the complete opportunity set that should be considered. Limiting your opportunity set to the one immediately at hand would be like limiting your spouse to the students you met in high school
Seth Klarman
#93. Like to have a catalyst - reduces dependence on the market: Distressed debt inherently has a catalyst - maturity.
Seth Klarman
#94. While it might seem that anyone can be a value investor, the essential characteristics of this type of investor-patience, discipline, and risk aversion-may well be genetically determined.
Seth Klarman
#95. Be indifferent if you lose your short term clients, remember they are your own worst enemy
Seth Klarman
#96. 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
#97. Investment success cannot be captured in a mathematical equation or a computer program.
Seth Klarman
#98. If another person were to enter the building, it would once again be empty.
Seth Klarman
#99. 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.
Seth Klarman
#100. We continue to adhere to a common-sense view of risk - how much we can lose and the probability of losing it. While this perspective may seem over simplisticor even hopelessly outdated, we believe it provides a vital clarity about the true risks in investing.
Seth Klarman
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