Seth Klarman
The government - the ultimate short-term-oriented player - cannot withstand much pain in the economy or the financial markets. Bailouts and rescues are likely to occur, though not with sufficient predictability for investors to comfortably take advantage. The government will take enormous risks in such interventions, especially if the expenses can be conveniently deferred to the future. Some of the price-tag is in the form of back- stops and guarantees, whose cost is almost impossible to determine.Collection: Pain
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.")Collection: Mother
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.Collection: Thinking
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.Collection: Risk
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.Collection: May
Like to have a catalyst - reduces dependence on the market: Distressed debt inherently has a catalyst - maturity.Collection: Maturity
I don't have a Bloomberg on my desk. I don't care.Collection: Care
There is no amount of bad news that the markets cannot see past.Collection: Past
By investing at a discount, Benjamin Graham knew that he was unlikely to experience losses.Collection: Loss
When a government official says a problem has been "contained," pay no attention.Collection: Government
Generally, the greater the stigma or revulsion, the better the bargain.Collection: Intelligent
Once you adopt a value-investment strategy, any other investment behavior starts to seem like gambling.Collection: Gambling
You need humility to say 'I might be wrong.'Collection: Humility
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.Collection: Opportunity
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 informationCollection: Safety
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.Collection: Thinking
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.Collection: Cooking
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.Collection: Believe
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.Collection: Talking
Avoid organizing investment team into silos.Collection: Team
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.Collection: Phones
Rather, risk is a perception in each investor's mind that results from analysis of the probability and amount of potential loss from an investment. If an exploratory oil well proves to be a dry hole, it is called risky. If a bond defaults or a stock plunges in price, they are called risky. But if the well is a gusher, the bond matures on schedule, and the stock rallies strongly, can we say they weren't risky when the investment after it is concluded than was known when it was made.Collection: Loss
Excess capacity in people, machines, or property will be quickly absorbed.Collection: People
Having great clients is the key to investment success.Collection: Keys
Value investing is predicated on the efficient market hypothesis being wrong.Collection: Investing
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.Collection: Goal
The cost of performing well in bad times can be relative underperformance in good times.Collection: Cost
The way to maximize outcome is to focus on the process.Collection: Focus
Costs and liabilities are rarely overstated.Collection: Cost
Value investing is at its core the marriage of a contrarian streak and a calculator.Collection: Intelligent
Value investors should completely exit a security by the time it reaches full value; owning overvalued securities is the realm of speculators.Collection: Exit
All an investor can do is follow a consistently disciplined and rigorous approach; over time the returns will comeCollection: Return
A simple rule applies: if you don't quickly comprehend what a company is doing, then management probably doesn't either.Collection: Simple
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.Collection: Investing
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.Collection: Philosophy
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.Collection: Focus
Why should the immediate opportunity set be the only one considered, when tomorrow's may well be considerably more fertile than today's?Collection: Opportunity
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.Collection: Reality
Investing is the intersection of economics and psychology. The analysis is actually the easy part. The economics, the valuation of the business isn't that hard. The psychology - how much do you buy, do you buy it at this price, do you wait for a lower price, what do you do when it looks like the world might end - those things are harder. Knowing whether you stand there, buy more, or whether something has legitimately gone wrong and you need to sell, those are harder things. That you learn with experience, by having the right psychological makeup.Collection: Makeup
Warren Buffett is right when he says you should invest as if the market is going to be closed for the next five years. The fundamental principles of value investing, if they make sense to you, can allow you to survive and prosper when everyone else is rudderless. We have a proven map with which to navigate. It sounds kind of crazy, but in times of turmoil in the market. I’ve felt a sort of serenity in knowing that if I’ve checked and rechecked my work, one plus one still equals two regardless of where a stock trades right after I buy it.Collection: Crazy
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.Collection: Matter
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.Collection: Opportunity
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.Collection: Optimistic
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.Collection: Fall
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.Collection: Risk
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.Collection: Loss
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.Collection: Philosophy
Graham's wonderful sentence as, an investor needs only two things: cash and courage. Having only one of them is not enough.Collection: Two
The avoidance of loss is the surest way to ensure a profitable outcome.Collection: Loss