Klarman Quotes & Sayings

When a Wall Street analyst or broker expresses optimism, investors must take it with a grain of salt. — Seth Klarman

It is crucial in a sound investment process to search a mile wide than a mile deep with they find something - also.. never stop digging for information. — Seth Klarman

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

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. — Seth Klarman

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. — 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

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

It is important to remember that value investing is not a perfect science. It is an, with an ongoing need for judgment, refinement, patience, and reflection. It requires endless curiosity, the relentless pursuit of additional information, the raising of questions, and the search for answers. It necessitates dealing with imperfect information - knowing you will never know everything and that that must not prevent you from acting. It requires a precarious balance between conviction, steadfastness in the face of adversity, and doubt - keeping in mind the possibility that you could be wrong. — Seth Klarman

The best protection against risk is knowing what you are doing. — Seth Klarman

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

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

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

The single greatest edge an investor can have is a long-term orientation. — Seth Klarman

investors. I have been a student of the philosophy of value investing, which of course was established, executed, and popularized by superinvestors Benjamin Graham, Warren Buffet, and Seth Klarman among — Sundeep Bajikar

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

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

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. — Seth Klarman

Value investing is risk aversion. — Seth Klarman

To achieve long-term success over many financial market and economic cycles, observing a few rules is not enough. Too many things change too quickly in the investment world for that approach to succeed. It is necessary instead to understand the rationale behind the rules in order to appreciate why they work when they do and don't when they don't. — Seth Klarman

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

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

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

One must understand the importance of an endless drive to get information and seek value. — Seth Klarman

Value investors should completely exit a security by the time it reaches full value; owning overvalued securities is the realm of speculators. — Seth Klarman

Courage is a function of process. — Seth Klarman

Having great clients is the key to investment success. — Seth Klarman

Never stop reading. History doesn't repeat, but it does rhyme. — Seth Klarman

The inability to hold cash and the pressure to be fully invested at all times meant that when the plug was pulled out of the tub, all boats dropped as the water rushed down the drain. — Seth Klarman

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

Generally, the greater the stigma or revulsion, the better the bargain. — Seth Klarman

It is always easiest to run with the herd; at times, it can take a deep reservoir of courage and conviction to stand apart from it. Yet distancing yourself from the crowd is an essential component of long-term investment success. — Seth Klarman

You need humility to say 'I might be wrong.' — Seth Klarman

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

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

Benjamin Graham wrote, "Those with enterprise haven't the money, and those with money haven't the enterprise, to buy stocks when they are cheap." — Seth Klarman

It turns out that value investing is something that is in your blood. There are people who just don't have the patience and discipline to do it, and there are people who do. So it leads me to think it's genetic. — Seth Klarman

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

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. — Seth Klarman

We buy expecting to hold a bond to maturity and a stock forever. — Seth Klarman

We work really hard never to get confused with what we know from what we think or hope or wish. — Seth Klarman

The government can always rescue the markets or interfere with contract law whenever it deems convenient with little or no apparent cost. (Investors believe this now and, worse still, the government believes it as well. We are probably doomed to a lasting legacy of government tampering with financial markets and the economy, which is likely to create the mother of all moral hazards. The government is blissfully unaware of the wisdom of Friedrich Hayek: "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.") — Seth Klarman

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

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

Value investing is at its core the marriage of a contrarian streak and a calculator. — Seth Klarman

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

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

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

My experience is that short sellers do far better analysis than long buyers because they have to. The market is biased upward over time-as the saying goes, stocks are for the long run. — Seth Klarman

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

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

While no one wishes to incur losses, you couldn't prove it from an examination of the behavior of most investors and speculators. The speculative urge that lies within most of us is strong; the prospect of a free lunch can be compelling, especially when others have already seemingly partaken. It can be hard to concentrate on potential losses while others are greedily reaching for gains and your broker is on the phone offering shares in the latest "hot" initial public offering. Yet the avoidance of loss is the surest way to ensure a profitable outcome. — Seth Klarman

In contrast to the speculators preoccupation with rapid gain, value investors demonstrate their risk aversion by striving to avoid loss. — Seth Klarman

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

The government can reasonably rely on debt ratings when it forms programs to lend money to buyers of otherwise unattractive debt instruments. — Seth Klarman

Short-term performance envy causes many of the shortcomings that lock most investors into a perpetual cycle of underachievement. Watch your competitors not out of jealousy but out of respect and focus your efforts not on replicating others' portfolios but on looking for opportunities where they are not. The only way for investors to significantly outperform is to periodically stand far apart from the crowd, something few are willing, or able, to do. — Seth Klarman

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

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

Speculators are obsessed with predicting: guessing the direction of stock prices. Every morning on cable television, every afternoon on the stock market report, every weekend in Barron's, every week in dozens of market newsletters, and whenever business people get together. 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 purely speculative undertaking. — Seth Klarman

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

It's incredibly important to note that when you don't allow failure, you get more failure. — Seth Klarman

You must buy on the way down. There is far more volume on the way down than on the way back up, and far less competition among buyers. It is almost always better to be too early than too late, but you must be prepared for price markdowns on what you buy. — Seth Klarman

Value investors will not invest in businesses that they cannot readily understand or ones they find excessively risky. Hence few value investors will own the shares of technology companies. Many also shun commercial banks, which they consider to have unanalyzable assets, as well as property and casualty insurance companies, which have both unanalyzable assets and liabilities. — Seth Klarman

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

There are only a few things investors can do to counteract risk: diversify adequately, hedge when appropriate, and invest with a margin of safety. It is a precisely because we do not and cannot know all the risks of an investment that we strive to invest at a discount. The bargain element helps to provide a cushion for when things go wrong. — Seth Klarman

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

Successful investors tend to be unemotional, allowing the greed and fear of others to play into their hands. By having confidence in their own analysis and judgement, they respond to market forces not with blind emotion but with calculated reason. Successful investors, for example, demonstrate caution in frothy markets and steadfast conviction in panicky ones. Indeed, the very way an investor views the market and it's price fluctuations is a key factor in his or her ultimate investment success or failure. — Seth Klarman

Literally draw a detailed map-like an organization chart-of interlocking ownership and affiliates, many of which were also publicly traded. So, identifying one stock led him to a dozen other potential investments. To tirelessly pull threads is the lesson that I learned from Mike Price. — Seth Klarman

Be focused on process and not outcome — Seth Klarman

Value investing is predicated on the efficient market hypothesis being wrong. — Seth Klarman

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

Sometimes buying early on the way down looks like being wrong, but it isn't. — Seth Klarman

Macro worries are like sports talk radio. Everyone has a good opinion which probably means that none of them are good. — Seth Klarman

When people give away stocks based on forced selling or fear that is usually a great opportunity. — Seth Klarman

The cost of performing well in bad times can be relative underperformance in good times. — Seth Klarman

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

I find value investing to be a stimulating, intellectually challenging, ever changing, and financially rewarding discipline — Seth Klarman

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

Investment success cannot be captured in a mathematical equation or a computer program. — Seth Klarman

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

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

Costs and liabilities are rarely overstated. — Seth Klarman

Hold cash when opportunities are not presenting themselves. — Seth Klarman

Nowhere does it say that investors should strive to make every last dollar of potential profit; consideration of risk must never take a backseat to return. Conservative positioning entering a crisis is crucial: it enables one to maintain long-term oriented, clear thinking, and to focus on new opportunities while others are distracted or even forced to sell. Portfolio hedges must be in place before a crisis hits. One cannot reliably or affordably increase or replace hedges that are rolling off during a financial crisis. — Seth Klarman

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

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

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

Unlike return, however, risk is no more quantifiable at the end of an investment that it was at its beginning. Risk simply cannot be described by a single number. Intuitively we understand that risk varies from investment to investment: a government bond is not as risky as the stock of a high-technology company. But investments do not provide information about their risks the way food packages provide nutritional data. — Seth Klarman

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

Investors frequently benefit from making decisions with less than perfect knowledge and are well rewarded for bearing the risk of uncertainty. The time other investors spend delving into the last unanswered detail may cost them the chance to buy into situations at prices so low they offer a margin of safety despite the incomplete information — Seth Klarman

Always look for forced urgent selling. — Seth Klarman

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

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

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

People should be highly sceptical of anyone's including their own, ability to predict the future, and instead pursue strategies that can survive whatever may occur. — Seth Klarman

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

Loss avoidance must be the cornerstone of your investment philosophy. — Seth Klarman

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

I think markets will never be efficient because of human nature. — Seth Klarman

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