The single greatest edge an investor can have is a long-term orientation.— Seth Klarman
The most viral Seth Klarman quotes that are little-known but priceless
Value investing is at its core the marriage of a contrarian streak and a calculator.
The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.
Investment success cannot be captured in a mathematical equation or a computer program.
Patience and discipline can make you look foolishly out of touch until they make you look prudent and even prescient
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.
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.
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.
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.
Value investing is risk aversion.
Over the long run, the crowd is always wrong.
The avoidance of loss is the surest way to ensure a profitable outcome.
Macro worries are like sports talk radio.
Everyone has a good opinion which probably means that none of them are good.
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.
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.
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.
When a stock is selling at a discount to liquidation value per share, a near rock-bottom appraisal, it is frequently an attractive investment.
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 panic is still a decision.
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.
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.
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.
The trick of successful investors is to sell when they want to, not when they have to.
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.
Value investors should completely exit a security by the time it reaches full value; owning overvalued securities is the realm of speculators.
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
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.
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.
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.
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
Loss avoidance must be the cornerstone of your investment philosophy.
Be sure that you are well compensated for illiquidity - especially illiquidity without control - because it can create particularly high opportunity costs.
Value investing is predicated on the efficient market hypothesis being wrong.
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.
The cost of performing well in bad times can be relative underperformance in good times.
In contrast to the speculators preoccupation with rapid gain, value investors demonstrate their risk aversion by striving to avoid loss.
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.
Ratings agencies are highly conflicted, unimaginative dupes.
They are blissfully unaware of adverse selection and moral hazard. Investors should never trust them.
Markets need not be in sync with one another.
Simultaneously, the bond market can be priced for sustained tough times, the equity market for a strong recovery, and gold for high inflation. Such an apparent disconnect is indefinitely sustainable.
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.
Avoiding where others go wrong is an important step in achieving investment success. In fact, it almost assures it.
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.
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.
In investing it is never wrong to change your mind.
It is only wrong to change your mind and do nothing about it.
We worry top-down, but we invest bottom-up
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
A simple rule applies: if you don't quickly comprehend what a company is doing, then management probably doesn't either.
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.
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.
Sometimes buying early on the way down looks like being wrong, but it isn't.
When people give away stocks based on forced selling or fear that is usually a great opportunity.