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

[rogerwilco]

"In our view, there is no such thing as a value company. Price is the essential determinant in every investment equation. At some price, every company is a buy; at some price, every company is a hold; and at a still higher price, every company is a sell. We do not really recognize the concept of a value company."

Sorry to say i believe the above very much. The problem is i am never sure about it when putting into practice.
So can anyone tell me how can we apply the above to "value investing"? Or how to relate it to value investing? Another words what is value? How to value? Or can make money is value?

Temperament, imho the above statement simply means that as investor, from time to time, we have to monitor the company value (which can change due to business dynamics) and compare it with the company stock price (which can change due to buyer and sellers action in the stock market).

If the company stock price appreciates and greatly exceeding the company value, the value company is no longer a value company since the downside risk is greater than the upside opportunity therefore it is wiser to sell.

The next question would be how do you value a company business? different investors would have different opinion

[Temperament]

"In our view, there is no such thing as a value company. Price is the essential determinant in every investment equation. At some price, every company is a buy; at some price, every company is a hold; and at a still higher price, every company is a sell. We do not really recognize the concept of a value company."

Sorry to say i believe the above very much. The problem is i am never sure about it when putting into practice.
So can anyone tell me how can we apply the above to "value investing"? Or how to relate it to value investing? Another words what is value? How to value? Or can make money is value?

Temperament, imho the above statement simply means that as investor, from time to time, we have to monitor the company value (which can change due to business dynamics) and compare it with the company stock price (which can change due to buyer and sellers action in the stock market).

If the company stock price appreciates and greatly exceeding the company value, the value company is no longer a value company since the downside risk is greater than the upside opportunity therefore it is wiser to sell.

The next question would be how do you value a company business? different investors would have different opinion

Yes lol! Sometimes i am right. Sometimes i am wrong. After all i am just one of the retail investors. (Or what they like to call me "POP & MUM" investor).
i hope i am right 51% of the time and the $amount when i am right should be significant, i think is enough already.

[rogerwilco]

Yes lol! Sometimes i am right. Sometimes i am wrong. After all i am just one of the retail investors. (Or what they like to call me "POP & MUM" investor).
i hope i am right 51% of the time and the $amount when i am right should be significant, i think is enough already.

agreed, it's like what Mohnish (Pabrai) said: “Unlike brain surgery, in investing you can be wrong 40% of the time and still do fine”. As long as our homerun more than enough to cover our loss, we should do fine

[KopiKat]

"In our view, there is no such thing as a value company. Price is the essential determinant in every investment equation. At some price, every company is a buy; at some price, every company is a hold; and at a still higher price, every company is a sell. We do not really recognize the concept of a value company."

Sorry to say i believe the above very much. The problem is i am never sure about it when putting into practice.
So can anyone tell me how can we apply the above to "value investing"? Or how to relate it to value investing? Another words what is value? How to value? Or can make money is value?

Temperament, imho the above statement simply means that as investor, from time to time, we have to monitor the company value (which can change due to business dynamics) and compare it with the company stock price (which can change due to buyer and sellers action in the stock market).

If the company stock price appreciates and greatly exceeding the company value, the value company is no longer a value company since the downside risk is greater than the upside opportunity therefore it is wiser to sell.

The next question would be how do you value a company business? different investors would have different opinion

Refer to Chapter 8 : The Art of Business Valuation in his book 'Margin of Safety'. The contents are very similar to that in the book 'The Big Secret for the Small Investor' by Joel Greenblat.

Happy reading... Hee..

[Temperament]

"In our view, there is no such thing as a value company. Price is the essential determinant in every investment equation. At some price, every company is a buy; at some price, every company is a hold; and at a still higher price, every company is a sell. We do not really recognize the concept of a value company."

Sorry to say i believe the above very much. The problem is i am never sure about it when putting into practice.
So can anyone tell me how can we apply the above to "value investing"? Or how to relate it to value investing? Another words what is value? How to value? Or can make money is value?

Temperament, imho the above statement simply means that as investor, from time to time, we have to monitor the company value (which can change due to business dynamics) and compare it with the company stock price (which can change due to buyer and sellers action in the stock market).

If the company stock price appreciates and greatly exceeding the company value, the value company is no longer a value company since the downside risk is greater than the upside opportunity therefore it is wiser to sell.

The next question would be how do you value a company business? different investors would have different opinion

Refer to Chapter 8 : The Art of Business Valuation in his book 'Margin of Safety'. The contents are very similar to that in the book 'The Big Secret for the Small Investor' by Joel Greenblat.

Happy reading... Hee..

i have read at least 1 of his book. i have found i quite like his writing/ideas. Will check NLB.
Thanks.

[rogerwilco]

Refer to Chapter 8 : The Art of Business Valuation in his book 'Margin of Safety'. The contents are very similar to that in the book 'The Big Secret for the Small Investor' by Joel Greenblat.
Happy reading... Hee..

Notice that it was titled "the art of business valuation" not "the science of business valuation" or "the newton law of business valuation".....

BTW, KopiKat, i like your sig. Even for a guy as talented as "the Oracle of Omaha", many years ago when he was asked where to find value, his answer was bringing a big stack of annual reports. Start with A and finish with Z, he said :p

[Temperament]

Refer to Chapter 8 : The Art of Business Valuation in his book 'Margin of Safety'. The contents are very similar to that in the book 'The Big Secret for the Small Investor' by Joel Greenblat.
Happy reading... Hee..

Notice that it was titled "the art of business valuation" not "the science of business valuation" or "the newton law of business valuation".....

BTW, KopiKat, i like your sig. Even for a guy as talented as "the Oracle of Omaha", many years ago when he was asked where to find value, his answer was bringing a big stack of annual reports. Start with A and finish with Z, he said :p

i know i am a ikan bilis but even what the great WB said, i still somehow always feel AR don't really gives me an edge in the market as most of you can read it better than me. Besides, not everyone interpret AR the same way. Then AR no matter how accurate it was, it's about the past 4 quarters. Sometimes i think market news about the AR summarised quite accurately. Besides looking forward, we can only "imagine" with the current company's situation (based on AR?) and markets news, what's going to happen to the company next. No one can be sure.
NO or Yes?

[Greenrookie]

AR is a must for me if I wish to understand the business and its risks. AR cannot help one make the right bets about price movement, as least in the short term. 1 year AR is useless though, u need to read through the years, or at least through 1 bull to bear cycle and also that ARss of competitor/s. I will slap myself real hard if I fail to do proper homework and allow glaring red flags to skip my eyes. AR should go with the prospectus if the business model is still relative the same, as all risks and suppliers, customers info are found. Then if the company is transparent enough u can see if it is growing from strength to strength despite the noise, and also notice companies that are only transparent at the good news and clamp up at the bads. I will usually run when I noticed such drop in transparency.

The theory is everybody is looking at ARs and creating spreadsheet, so where is your niche in investment? I woul 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.

[Temperament]

AR is a must for me if I wish to understand the business and its risks. AR cannot help one make the right bets about price movement, as least in the short term. 1 year AR is useless though, u need to read through the years, or at least through 1 bull to bear cycle and also that ARss of competitor/s. I will slap myself real hard if I fail to do proper homework and allow glaring red flags to skip my eyes. AR should go with the prospectus if the business model is still relative the same, as all risks and suppliers, customers info are found. Then if the company is transparent enough u can see if it is growing from strength to strength despite the noise, and also notice companies that are only transparent at the good news and clamp up at the bads. I will usually run when I noticed such drop in transparency.

The theory is everybody is looking at ARs and creating spreadsheet, so where is your niche in investment? I woul 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.

Well put.
But there are many less capable in AR understanding or interpretation and still can make a go for it.

[Greenrookie]

AR is a must for me if I wish to understand the business and its risks. AR cannot help one make the right bets about price movement, as least in the short term. 1 year AR is useless though, u need to read through the years, or at least through 1 bull to bear cycle and also that ARss of competitor/s. I will slap myself real hard if I fail to do proper homework and allow glaring red flags to skip my eyes. AR should go with the prospectus if the business model is still relative the same, as all risks and suppliers, customers info are found. Then if the company is transparent enough u can see if it is growing from strength to strength despite the noise, and also notice companies that are only transparent at the good news and clamp up at the bads. I will usually run when I noticed such drop in transparency.

The theory is everybody is looking at ARs and creating spreadsheet, so where is your niche in investment? I woul 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.

Well put.
But there are many less capable in AR understanding or interpretation and still can make a go for it.

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.

When I read about the mergers and aquisitions happening, and do a brief lookout, the numbers usually don't impressed. But others see potential. I can just slogged in my own ways in the meantime