Seth Klarman Quotes

373 Seth Klarman Quotes

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Contrary to the promises of underwriters, junk bonds were a poor investment. They offers too little return for their substantial risk. To meet contractual interest and principal obligations, the number of things that need to go right for issuers was high, while the margin for error was low.
Seth Klarman

We may confidently expect that there will be new investment fads in the future. They too will expand beyond the rational limitations of the innovation. As surely as this will happen, it is equally certain that no bells will toll to announce the excess. Investors who study the junk-bond debacle may be able to identify these new fads for what they are and avoid them. And … avoiding losses is the most important prerequisite to investment success.
Seth Klarman

I too believe that avoiding loss should be the primary goal of every investor. This does not mean that investors should never incur the risk of any loss at all. Rather ‘Don’t lose money’ means that over several years an investment portfolio should not be exposed to appreciable loss of principal.
Seth Klarman

The avoidance of loss is the surest way to ensure a profitable outcome.
Seth Klarman

The actual risk of a particular investment cannot be determined from historical data. It depends on the price paid.
Seth Klarman

Loss avoidance must be the cornerstone of your investment philosophy.
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

Value investing combined the conservative analysis of underlying value with the requisite discipline and patience to buy only when a sufficient discount from that value is available.
Seth Klarman

Sometimes a value investor will review in depth a great many potential investments without finding a single one that is sufficiently attractive. Such persistence is necessary, however, since value is often well hidden.
Seth Klarman

The disciplined pursuit of bargains makes value investing very much a risk-averse approach.
Seth Klarman



Value investors will not invest in businesses that they cannot readily understand or ones they find excessively risky.
Seth Klarman

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

Because investing is as much an art as a science, investors need a margin of safety.
Seth Klarman

Margin of safety, by always buying at a significant discount to underlying business value and always giving preference to tangible assets over intangibles. By replacing current holdings as better bargains come along. By selling when the market value comes to reflect it’s underlying value and by holding cash, if necessary until other attractive investments become available.
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 realisation of underlying value. Give preference to companies having good managements with a personal financial stake in the business.
Seth Klarman

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

Many of the forces that cause securities prices to depart from underlying value are temporary.
Seth Klarman

The arbitrage profit from purchasing the undervalued stock of an ongoing business can be more difficult to realise. The degree of difficulty in a given instance depends, among other things, on the magnitude of the gap between price and value, the extent to which management is entrenched, the identity and ownership position of the major shareholders, and the availability of credit in the economy for corporate takeover activity.
Seth Klarman

The hard part is discipline, patience and judgement.
Seth Klarman

Value investing is simple to understand but difficult to implement. Value investors are not super sophisticated analytical wizards who create and apply intricate computer models to find attractive opportunities or assess underlying value. The hard part is discipline, patience and judgement. Investors need discipline to avoid the many unattractive pitches that are thrown, patience to wait for the right pitch, and judgement to know when it is time to swing.
Seth Klarman



The entire strategy can be concisely described as ‘Buy a bargain and wait.’ Investors must learn to assess value in order to know a bargain when they see one. Then they must exhibit the patience and discipline to wait until a bargain emerges from their searches and buy it, regardless of the prevailing direction of the market or their views about the economy at large.
Seth Klarman

Value investors can easily determine when the original reason for making an investment ceases to be valid. When the underlying value changes. When management reveals itself to be incompetent or corrupt, or when the price appreciates to more fully reflect underlying business value, a disciplined investor can re-evaluate the situation and, if appropriate, sell the investment. Huge sums have been lost by investors who have held on to securities after the reason for owning them is no longer valid. In investing it is never wrong to change you mind. It is only wrong to change your mind and do nothing about it.
Seth Klarman

Greater risk does not guarantee greater return. To the contrary, risk erodes return by causing loses. By itself risk does not create incremental return, only price can accomplish that.
Seth Klarman

Indeed, investors should expect prices to fluctuate and should not invest in securities if they cannot tolerate some volatility.
Seth Klarman

The trick of successful investors is to sell when they want to, not when they have to.
Seth Klarman

Many investors insist on affixing exact values to their investments, seeking precision in an imprecise world, but business value cannot be precisely determined.
Seth Klarman

The future is not predictable except within fairly wide boundaries.
Seth Klarman

The number of things that can go wrong (in business) greatly exceeds the number that can go right.
Seth Klarman

How do value investors deal with the analytical necessity to predict the unpredictable? The only answer is conservatism.
Seth Klarman

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



Net-net working capital is defined as net working capital minus all long term liabilities.
Seth Klarman

Since value investors attempt to buy securities trading at a considerable discount from the value of a business’s underlying assets, a liquidation is one way for investors to realise profits.
Seth Klarman

Investors must remember that they need not swing at every pitch to do well over time, indeed selectivity undoubtedly improves an investor’s results. For every business that cannot be valued, there are many others that can. Investors who confine themselves to what they know, as difficult as that may be, have a considerable advantage over everyone else.
Seth Klarman

Upon occasion attractive opportunities are so numerous that the only limiting factor is the availability of funds to invest; typically the number of attractive opportunities is much more limited.
Seth Klarman

Value investment niches: I) Shares selling at a discount to break up or liquidation value II) Rate of return situations III) Asset-conversion opportunities.
Seth Klarman

When a company eliminates it’s dividend, it’s shares often fall to unduly depressed levels.
Seth Klarman

When the reason for the undervaluation can be clearly identified, it becomes an even better investment because the outcome is more predictable.
Seth Klarman

Year-end tax selling also creates market inefficiencies. The internal revenue code makes it attractive for investors to realise capital losses before the end of each year. Selling driven by the calendar rather than by investment fundamentals frequently causes stocks that declined significantly during the year to decline still further. This generates opportunities for value investors.
Seth Klarman

Value investing is by its very nature is contrarian. Out of favour securities may be undervalued; popular securities almost never are.
Seth Klarman

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



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