Seth Klarman and Joel Greenblatt have a lot of things in common. They both are extremely successful value investors who have a long record of beating the market by wide margins. Both are widely followed in the value investing community and are very popular on GuruFocus. Both of them run large and successful hedge funds. One last similarity between the two is the both are excellent authors. Joel Greenblatt wrote two books, the more in depth of the two being titled You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits. Normally when you see the title of a book with such a pompous statement you should run in the other direction as fast as possible, however this book is accurately described by its title. Seth Klarman wrote a book nearly 20 years ago titled Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor. Both are excellent books about investing in obscure securities that are unwanted and not analyzed by others.
Joel Greenblatt and Seth Klarman have many things in common but here is where their paths diverge. Greenblatt’s book is selling on Amazon for $10 while Klarman’s is selling for $1200. For those of you who have not read Klarman’s book I will give you an outline of it. The first part of the book Seth Klarman discusses how markets are not efficient, bubbles and the difference between speculation and investing. In the second part of the book Klarman discusses investing with a margin of safety, and refutes the common myth that to get more return you need to take more risk. The third and last section of the book is where Klarman discusses how actually to find securities that have higher returns. As I mentioned in a [www.gurufocus.com] Klarman is not a classic low P/E, high dividend etc investor. He tries to look for areas with the greatest inefficiencies in the market where most institutional investors are unwilling or unable to invest. Some of these situations include spinoffs, asset sales, overcapitalizations and liquidations. Klarman provides a few examples but overall his book is scant on details.
Joel Greenblatt in his book You Can Be a Stock Market Genius writes a similiar book. He mostly skips the first two sections of Klarman’s book and focuses almost exclusively on the last section which discusses how to find value in special situations. Greenblatt touches many of the topics with a large and detailed section focusing on spin offs. Greenblatt gives many details of previous spin off situations and how to profit from them. He discusses how currently certain areas such as bankruptcies have become so crowded with sophisticated investors looking for value, that it is very hard to earn high returns in these situations.
When Baupost, the $30 billion Boston-based hedge fund now managed by Seth Klarman, was founded in 1982, it was launched with a core set of aims. Q4 2021 hedge fund letters, conferences and more Established by Harvard professor William Poorvu and a group of four other founding families, including Klarman, the group aimed to compound Read More
Overall I was disappointed after reading Margin Of Safety. After expecting for months to find the famous, incredible book I finally found it. However, I was disappointed after reading it. The first two sections of the book give good advice, however any good value book such as The Intelligent Investor could be a substitute for it. The last section of the book offers good advice but is meager on detail. I think Joel Greenblatt does an excellent job filling in many of those details.
This article is no way a snipe at Klarman. He is an amazing investor and does not need approval from me regardless. I am certain he can write a book with much more examples and details of how to invest in special situations. However, my disappointment was that he did not write a book as I described. If you can get your hands on a copy of the book for a cheap price I would recommend reading it. However if you have to buy it, I recommend buying Greenblatt’s book instead, saving the $1190 and putting into your 401K.
Joel Greenblatt’s book can be found on amazon.com by following this link You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits
Seth Klarman’s book can be found on amazon.com by following this link Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor