Seth Klarman Resource Page

Seth Klarman

Seth Klarman

Profile: From GuruFocus

Seth Klarman is a value investor and Portfolio Manager of the investment partnership The Baupost Group. Founded in 1983, The Baupost Group now manages $7 billion, and has averaged returns of nearly 20% annually since their inception. Seth Klarman is the author of the book Margin of Safety,which sells for over $1000. Mr. Klarman attended Cornell University where he received a degree in economics, and later attended Harvard University where he earned an M.B.A.

Investing Philosophy:

Seth Klarman invests in a wide array of investments ranging from fairly traditional value stocks to more esoteric investments like distressed debt, liquidations, and foreign equities or bonds. Klarman doesn’t mind “doing nothing” on occasion. He is completely unperturbed by the idea of sitting on the sidelines holding cash whenever investment opportunities are scarce. Klarman is notable for his willingness to hold significant amounts of cash in his investment portfolios, sometimes in excess of 50% of the total.In fact, in 2005 and 2006, nearly half of his portfolio was held in cash. Investing, he cautions, is more than just producing absolute returns. Too often investors focus on that one easy number “return” and ignore the risks incurred to generate that number.

Seth Klarman Portfolio Holdings and Stock Picks.

Note: The vast Majority of Klarman’s holdings are not reported on his 13-F

See My article What Is Seth Klarman Hiding From Us?

Quotes from Seth Klarman

Many equity investors feel compelled to remain 100% invested in equities at all times. Bond investors are often similarly constrained. We strongly believe that this mentality leads to pursuit of relative rather than absolute investment returns, a direction we certainly want to avoid…A smaller pool of funds seeking to avoid meaningful declines in market value at every point in time and seeking more aggressive return objectives cannot afford to be fully invested in the absence of attractive opportunities.

“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.”

“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.”

“So the question is not, Are people smart, are people sophisticated, do they have clever ways of looking at things, are they looking in the right areas? The question is, Are there periods when none of that matters because their human natures get the best of them ? “

“By holding expensive securities with low prospective returns, people choose to risk actual loss. We prefer the risk of lost opportunity to that of lost capital, and agree wholeheartedly with the sentiment espoused by respected value investor Jean-MarieEveillard, when he said, “I would rather lose half our shareholders…than lose half our shareholder’s money…”

“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 simplistic or even hopelessly outdated, we believe it provides a vital clarity about the true risks in investing.”

“Markets are inefficient because of human nature – innate, deep-rooted, permanent. People don’t consciously choose to invest withemotion - they simply can’t help it.

“So if the entire country became securities analysts, memorized Benjamin Graham’s Intelligent Investor and regularly attended Warren Buffett’s shareholder meetings, most people would, nevertheless, find themselves irresistibly drawn to hot initial public offerings, momentum strategies and investment fads…People would, in short, still be attracted to short-term, get rich quick schemes.

“In short, we believe market efficiency is a fine academic theory that is unlikely ever to bear meaningful resemblance to the real world of investing.”

[ad#Google Adsense-3]

Baupost Shareholder Letters

Baupost fund letters by Seth Klarman from 1995-2001

2008 Client letter

Books authored by Seth Klarman

Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor

2009

Seth A. Klarman, MBA, The Baupost Group March 17, 2009 – Videoconference

Why Most Investment Managers Have It Backwards is a good, short article about Klarman and his investment style

Seth Klarman’s Margin Of Safety, And Joel Greenblatt’s You Can Be A Stock Market Genius. The $1200 Vs $10 Book Article comparing Joel Greenblatt’s book You can Be a Stock Market Genius with Seth Klarman’s book Margin of Safety

AHarvard Business School interview with Seth Klarman regarding his experience at Harvard and his views on leadership and success and the priority of giving back to one’s community.

2008

A short Interview With Seth Klarman

Psychology-of-Leadership-Guest-Lecturer- Seth Klarman. 48 minute video interview with Klarman

Article based on excerpts from Margin of Safety which state Klarman’s three methods of Valuing A Business:

DCF/NPV
Liquidation
Market Value

Seth Klarman: Second Coming of Benjamin Graham?

Harvard Business Review interviews Seth Klarman

Absolute Return + Alpha interview with Seth Klarman

Interview with Klarman titled Channelling Graham and Dodd: A Conversation with Seth Klarman

Seth Klarman at CIMA Conference

2007

A scaredy-cat approach pays off for hedge fund Article about Seth Klarman from The Sydney Morning Herald

Seth Klarman MIT Speech- 13 page text of Klarman’s speech

Manager Frets Over the Market, but Still Outdoes It – Interesting article about Seth Klarman from the NY Times.

2006

Klarman discusses Today’s Market Environment in some of his excerpts from Baupost’s End of Year Letter. Klarman correctly identifies the possible downturn of the US housing market, and the increasing problems of households taking on too much debt

Article about Klarman’s Speech in Colombia University- 2006 Klarman discusses how he made over 5 times his money investing in Enron debt, what his investment principles are, his thoughts on the investment management industry, why he doesn’t go short and why he uses derivatives.

Seth Klarman on the Art of Complex Deep Value Investing

Article by James Altucher in TheStreet.com on how to Trade Like Seth Klarman

Article about Klarman’s book Margin Of Safety The $700 Used Book

Excerpts from Baupost Limited Partnerships 2005 Year-End Letter (pdf)
[ad#Google Adsense-3]

2005

From the Wharton Journal Seth Klarman’s guide to finding value

Article by Seth Klarman regarding market efficiency Searching for Rational Investors In a Perfect Storm – A Response to Lowenstein’s Searching for Rational Investors In a Perfect Storm

1989

ARE THESE THE NEW WARREN BUFFETTS? The dozen young investment managers you’ll meet here are brainy, ethical, and good at making money grow consistently.- Interesting article from over twenty years ago from fortune magazine. Many famous future investors are featuring including Seth Klarman, Jim Cramer, Jim Chanos, Eddie Lampert, Glen Greenberg and Michael Price.