often very overvalued levels. I knew a
market collapse was possible. And sometimes, I imagined that I was back in 1930 after the market had peaked the year before, and then dropped 30%. Surely, there would’ve been some tempting bargains then.
And just as surely, you’d have been crushed by the market’s subsequent plunge over the next three years — down to below 20% of 1929 levels. A fall from 70 to 20, and from 100 to 20, would feel almost exactly the same by the time you hit 20.” —Seth Klarman
“If only one word is to be used to describe what Baupost does, that word should be: ‘Mispricing’. We look for mispricing due to over-reaction.” – Seth Klarman
“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 ValueLine. How you fill your inbox is very important.” – Seth Klarman
“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.” – Seth Klarman
“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.” – Seth Klarman[18]
Regarding a focus on daily price movements: “I don’t have a Bloomberg on my desk. I don’t care.” – Seth Klarman[19]
“It is crucial to have a strategy in place before problems hit, precisely because no one can accurately predict the future direction of the stock market or economy. Value investing, the strategy of buying stocks at an appreciable discount from the value of the underlying businesses, is one strategy that provides a road map to successfully navigate not only through good times but also through turmoil. Buying at a discount creates a margin of safety for the investor—room for imprecision, error, bad luck or the vicissitudes of volatile markets and economies. Following a value approach won’t be easy for everyone, especially in today’s media-dominated, short-term oriented markets, in that it requires deep reservoirs of patience and discipline. Yet it is the only truly risk averse strategy in a world where nearly all of us are, or should be, risk averse.” – Seth Klarman
“The greatest long-range investment profits are never obtained by investing in marginal companies. Investors desiring maximum gains over the years had best stay away from low profit-margin or marginal companies.” – Phil Fisher
“As time goes on, I get more and more convinced that the right method of investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.” – J. M. Keynes
“We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort level he must feel with its economic characteristics before buying into it.” – Warren Buffett
“Quality is more important than quantity. One home run is much better than two doubles.” – Steve Jobs
“Focus and simplicity…once you get there, you can move mountains.” – Steve Jobs
“The only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle.” – Steve Jobs
“Our business is a little bit of a fraud, right? We offer the possibility of attaining what’s not possible attainable for everyone.” – Seth Klarman[20]
The four most dangerous words in investing: This time is different. – Attributed to John Templeton
Invest at the point of maximum pessimism. – Attributed to John Templeton
“If a business is not ethical, it will fail, perhaps not right away but eventually.” – John Templeton
“I never ask if the market is going to go up or down because I don’t know, and besides it doesn’t matter. I search nation after nation for stocks, asking: ‘Where is the one that is lowest-priced in relation to what I believe it’s worth?’ Forty years of experience have taught me you can make money without ever knowing which way the market is going.” – John Templeton[21]
“One of my favorite clichés [is] the French saying: ‘The more it changes the more it’s the same thing.’ I have always thought this motto applied to the stock market better than anywhere else. The economic world has changed radically and it will change even more. Most people think now that the essential nature of the stock market has been undergoing a corresponding change. But if my cliché is sound…then the stock market will continue to be essentially what it always was in the past – a place where a big bull market is inevitably followed by a big bear market. In other words, a place where today’s free lunches are paid for doubly tomorrow.” – Ben Graham
“There are those who don’t know and those who don’t know they don’t know.” John Kenneth Galbraith
“Undervaluations caused by neglect or prejudice may persist for an inconveniently long time, and the same applies to inflated prices caused by over-enthusiasm or artificial stimulants.” – Ben Graham
“The central principle of investment is to go contrary to the general opinion, on the grounds that if everyone agreed about its merits, the investment is inevitably too dear and therefore unattractive.” – J.M. Keynes
“As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. . . . One’s knowledge and experience are definitely limited and there are seldom more than two or three enterprises at any given time in which I personally feel myself entitled to put full confidence.” – J.M. Keynes
“You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map – way off the map.” – Warren Buffett
“The investor’s chief problem – even his worst enemy – is likely to be himself.” – Benjamin Graham
“Better to buy a great business at a fair price than a fair business at a great price.” – attributed to Charlie Munger
“I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther.” – Charlie Munger
“This is really crucial: Warren [Buffett] is one of the best learning machines on this earth. The turtles who outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you.” – Charlie Munger
“(Value) investing is not a paint-by-numbers exercise. Skepticism and judgment are always required.” – Seth Klarman[22]
“The art of stock picking is more about synthesizing information across disciplines and making decisions than a strict devotion to finance.” – Allan Mecham
“Every corporate security may be best viewed, in the first instance, as an ownership interest in, or a claim against, a specific business enterprise.” – Benjamin Graham
“We don’t deal in absolutes. We deal in probabilities.” – Seth Klarman[23]
In 2005, a group of students from the University of Kansas met with Warren Buffett. Their first question was whether he would still be able to earn investment returns of 50% annually. Buffett responded:
“Yes, I would still say the same thing today. In fact, we are still earning those types of returns on some of our smaller investments. The best decade was the 1950s; I was earning 50% plus returns with small amounts of capital. I could do the same thing today with smaller amounts. It would perhaps even be easier to make that much money in today’s environment because information is easier to access.
“You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map – way off the map. You may find local companies that have nothing wrong with them at all. A company that I found, Western Insurance Securities, was trading for $3/share when it was earning $20/share! I tried to buy up as much of it as possible. No one will
