Some great quotes from value investors Courtesy of Value Investor Insight’s latest edition. The title of the quotes segment is ‘Fifty Shades of Value Investing’. The phrase comes from Seth Klarman’s 2012 shareholder letter, as we first reported. The quotes below from David Einhorn, and many others appear to be new. Check it out!
As our positions have gotten larger, we often find ourselves in situations where we can’t trade out positions quickly. There have been cases where we own, say, one million shares and we think we want to sell, but we can only sell 25,000 shares right away. You could say, “Why bother, it’s only 25,000 shares?” But our feeling is that’s silly – it might only help solve 2.5 percent of the problem, but the problem is now 2.5 percent smaller than it was. We also find that as you begin to exit a position, sometimes the stomach tells you whether you want to keep going, accelerate, or whether it isn’t really necessary.
—David Einhorn, Greenlight Capital
Value investors should completely exit a security by the time it reaches full value; owning overvalued securities is the realm of speculators.
—Seth Klarman, The Baupost Group
Selling for me is rarely about pure valuation. The really good ones are too hard to find – you don’t want to part with them lightly. Life experience tells me that if you sell something at $50 and tell yourself you’ll get back in if it goes back down to $35, it will go down to $35.01 and the next time you have a serious look it will be at $300. That hurts.
—Chuck Akre, Akre Capital
The market encourages all kinds of anchoring. The price at which you bought a stock is very vivid in your mind, but in reality you’d be much better off if immediately after the purchase you forgot the price you paid. We also ascribe importance to 52-week highs and lows, but why that? It would make as much sense to look at the highs and lows over 70 weeks, or 40 weeks.
Warren Buffett talks about a company’s value moving through innovation, imitation and then idiocy phases. We’re most comfortable in the early stages when we think we’re kind of writing the intellectual property. That’s not to say there’s not a lot of money to be made in the imitation and even idiocy phases, but it’s not our native
ground. If we’re saying the same thing as the consensus and something is no longer misunderstood, chances are we’re selling.
—Adam Weiss, Scout Capital
—Dan Ariely, Duke University