Margin of Safety was written in 1991 by Seth Klarman and has also become a classic touchbook for parallel investors with Graham. This book was only $ 20 when it was published, but up to now, the book cover price is 1500 $ on Amazon.
Through the book, Klarman argues that a value investor often stands out from the crowd, defies conventional wisdom and goes against the prevailing investment direction. Therefore, he also emphasized “investing is a very lonely job”.
“The margin of safety” is not just a rule, but a logical and intrinsically prudent mindset that helps an investor, or a businessman, or even a construction engineer, reduce risk. risk and ensure sustainability in any of its decisions.
Please do your own research here. I just share some of Klarman’s views from the book:
- Extremely vigilant and focused primarily on minimizing risk
- Not simply finding cheap stocks, but cheap stocks of the best companies
- Calculate value carefully, use a significant and diversified security margin to help minimize risks in imperfect information environments.
- Warn Wall Street brokers, analysts and advisors, even hedge funds just want to enrich themselves rather than prioritize and care about their customers.
- Usually invests in “special situations”, like stocks that filed for bankruptcy or risk-arbitrage situations
- Suggest the use of many valuation methods at the same time, because really no one method is perfect and cannot accurately calculate the real value of a company.
- Willingness to restructure most of the portfolio in cash when there is no opportunity
- It is suggested that investors should focus on absolute investment results of themselves rather than comparing with the market.
- Emphasize that it is important not only to look for an undervalued asset but also to find out why it is undervalued.
- Do not hesitate to go against the wind and bet against the crowd.
- Investors are discouraged from using stop loss orders, because that way they will not be able to buy more great stocks when the price is cheaper.
About Seth Klarman
Seth Klarman is an American billionaire and a hedge fund manager, known as a value investor and he is the executive director and portfolio manager of Baupost Group, a company. privately which he founded in 1982 in Boston.
When he was four years old, he redecorated his room to fit a retail store that placed price tags on all his belongings and gave his fifth grade lecture on the logistics of buying stocks. As he grew up, there were a series of small time businesses that included a paper roadmap, a snow cone, a snow shovel business, and the sale of coin collections on weekends. When he was 10 years old, he bought his first stock, a share of Johnson & Johnson (the stock split three and one times and tripled his original investment). At the age of 12, he frequently called his broker to get stock quotes, the reason behind buying a Johnson & Johnson stake was that he used a lot of bands (the company’s product). in previous years.
When he was six, he moved to Mt. The Washington area of Baltimore, Maryland, is close to the Pimlico Track, and grew up in a traditional Jewish family. His father was a public health economist at Johns Hopkins University and his mother was a psychiatric social worker. His parents divorced shortly after they moved to Baltimore.
Margin of Safety PDF download link