Seth Klarman: Price is the essential determinant in every investment equation

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(07-05-2013, 09:16 AM)Greenrookie Wrote: I would like to point up that it is a myth that every investors do basic homework like tracking annual and quarter reports. It allow me to keep my cool when price drop below my entry price and courage to accumulate and my head when it run above my calculated fair value.

Indeed, you will be surprised that institutional investors can be quite sloppy in their research work. Apparently, there are many who doesn't do their channel checks and often rely on brokerage reports. Looking through 5 to 10 years of annual reports may sound simple but not many can go through such 'boring' research task. If a good actionable idea only surface once out of every 50 companies, you effectively have to read 250 annual reports to get a good idea. People often wants the shortcut but they don't know that knowledge itself works in the magic of compounding as well. One day, the hard work will pay off.

(07-05-2013, 09:16 AM)Greenrookie Wrote: Of course, it's a must have for me, as I am an novice when investing is concerned and have no exp in running a business. Others with years of experience investing or is a great businessman will definitely see a business than just numbers. But until I gain more insights, I am a super suay person, who always but something then realized something wrong/ or risk I have not accounted for.

To put it short, for fundamental analysis, it never hurts to have another additional point of check. Whether it is the company's 10 years annual report or a competitor's or even speaking to a small-time distributor/dealer of their product, it will add value to your research process. Normally, for long-term investor like us, we have no rush in our research. We can do the essential 70% to have a good picture and subsequently fill up the big picture.

"But until I gain more insights, I am a super suay person, who always buy something then realized something wrong/ or risk I have not accounted for."

Well, sometimes it is also evaluating the impact of the new unaccounted risk. One should not fall to the flaw of anchoring bias. There was once I got invested in a HK-listed company but subsequently realized they have a large amount of A/Rs since their clients are SOEs. I sold out at 0% net gain because of this but the stock doubled one year later. My mistake was that I anchored too much on the receivables. I forgot to realise that the main root of concern was whether the long A/R will end up squeezing working capital demands. In this case, there wasn't because the company has 50% of its marcap in cash. Growth could have been internally funded and they can afford to wait for the A/R to be paid down.
"Criticism is the fertilizer of learning." - Sir John Templeton
If you all are interested in his out of print book “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor”, it could be found here:

[Moderator: We do respect IP here. I appreciate your willingness to share, but I don't think it is distributed with approval. Please take note not to do the similar sharing in the future]
I suggest the above link be removed. We must respect IP rights, just like we dont want people (e.g. brokers) to 'steal' our
stock ideas, without permission.
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
(07-02-2014, 03:53 PM)opmi Wrote: I suggest the above link be removed. We must respect IP rights, just like we dont want people (e.g. brokers) to 'steal' our
stock ideas, without permission.

Agreed. I removed the link, and put in the reminder, instead of removed the whole post.

“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
Ops apologies for that.
Good compilation but note the caveat on OPMI below

(06-05-2013, 01:56 PM)specuvestor Wrote: I'm actually not contradicting MW... I'm adding to what he says Smile

I'm saying the key difference between what Seth said and minorities is the control portion. The latter are usually passive and without control. OTOH the former could for eg buy distressed debt at huge discount and control the company. That's why for them price is the major determinant. They can REALISE the value of an asset by exerting control. This is markedly different from us... hence my caution that we have to read their literature with understanding of the circumstances.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
Seth Klarman Letters: 1995 - mid 2001
Unfortunately, the youtube video for the interview went private before I had a chance to enjoy it. The next best thing would be a transcript.

Seth Klarman has lost a bit of his halo recently. We can't really blame anyone because no one can fight cycles - one simply needs to have a respect for them. There is a thin line between been "stubborn" and "intellectually honest", and real wisdom/humility is required to draw a line between them.

Quotes from Seth Klarman Interview

"Today, there's not so much mean reversion. Things may not be mean-reverting because of technological disruption, so I think investors have had to raise their game massively in the last several decades, and I'm not done raising it. I probably haven't raised it as high as it needs to be. It is a great time to be knowledgeable about technology; it was a great time if you could figure out what Amazon was up to. For a value investor, it looked hopelessly risky but for a tech investor, maybe with the right insight into the value of platforms and the value of winner take all business models, that would have been a good thing to have that I didn't have.

I pat myself on the back and say, okay, Seth, you were a schmuck twenty years ago and ten years ago for not figuring it out, but you were smart to figure it out five years ago. That's all an investor can do; be intellectually honest, be self-critical we're justified, and keep trying to get better every day. Like Warren Buffett, the best investors study read admit mistakes um always looking to get smarter and wiser because what else can you do as a person."

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