Seth Klarman’s 1991 Margin of Safety is an investor classic. Taking its title from Benjamin Graham's admonition to always invest with a margin of safety, the book teaches valuable risk-averse investment strategies and expounds on the philosophy of value investing as well as the logic behind it.
In the book, the billionaire value investor and hedge fund manager teaches how to avoid losing your shirt even in down-markets and also how to avoid falling prey to Wall Street’s numerous fads.
Margin of Safety is highly revered on Wall Street where it’s regarded as a must-have “bible of value investing” and a collector’s item.
Unfortunately, the book has been out-of-print for years and the only way to get your hands on one has been to buy a used copy (or a bogus reproduction) on Amazon. As you might imagine, such a rare gem does not come cheap: An original used paperback copy is currently going for $1,500 on Amazon with a cheaper hardcover retailing at a not-so-cheap $749.99.
So you can imagine the shock and incredulity when shoppers discovered one day that they could get a copy on Amazon Kindle for only $9.99.
But just in case you are thanking the stars for Klarman’s charity or are about to rush to Amazon to get yourself a copy, hold your horses…
According to Baupost Group, the hedge fund that Klarman manages, the book appeared on Kindle without his authorization. Consequently, it was taken down after just a few days.
If you were fortunate enough to purchase a Kindle copy of the Margin of Safety, you might want to kindly consider revoking your rights to it or risk this shrilly authoritarian boilerplate:
‘‘Amazon.co.uk and its affiliates reserve the right to refuse service, terminate accounts, remove or edit content, or cancel orders at their sole discretion.’’
The Seth Klarman Investment Philosophy
If this if the first time you are hearing about Seth Klarman, don’t fret—it’s by design. The founder of Baupost Group, a $30-billion hedge fund, is widely known for his secrecy.
Unlike most money managers who spend their time touting their financial exploits in a bid to attract more money to their funds, Klarman is extremely reclusive and rarely gets mentioned in the media. His investment philosophy and style are as idiosyncratic as he is himself—he is probably the only fund manager to ever return his clients’ money after failing to find stocks that passed his stock-screener.
But don’t let his sui generis investment style fool you—Klarman is one of the most successful fund managers in the business today, even more successful than Warren Buffett whose value-investing style he strives to emulate.
According to CNBC, Klarman’s fund has delivered 16.4 percent average annual return over the past 30 years. That’s 64 percent better than the S&P 500, which has only managed 10 percent annual return over the period, and definitely more than most money managers’ given their reputation to underperform the broad-market. He is also reported to have minted nearly $23 billion in profits for his clients. Related: Life Returns To S&P 500 Ahead Of Earnings Report
Here’s a classic Klarman quote dished out as advice to money managers and, by extension, investors:
"If you're focused on absolute returns, the idea of losing people's money becomes fairly abhorrent. ... Your goal is not to lose less, your goal is to try to make money all the time, protect capital on the downside and still do well enough on the upside."
Your goal should be to make money on all your trades…not just lose less than everybody else during selloffs.
By Josh Owens for Safehaven.com
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