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The Odd Lot
The Odd Lot
Articles (4) 

A Long Lost Interview with Seth Klarman (Baupost Group)

January 12, 2014

Having a hard time find bargains in this market? So did Seth Klarman (Trades, Portfolio) in 1991 (or, for that matter, now) . Here is a link to a long interview that (the usually media-averse) Klarman gave during a frothy period for markets. Seth Klarman (Trades, Portfolio) discusses how Baupost operates and gives a few investment examples:

Seth Klarman 1991 Interview


'The Odd Lot' is a new investment blog created for the minority of value-investors that think and invest independently of the vast majority of market parcipants (i.e. the 'odd ones out'). 

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Rating: 4.2/5 (9 votes)


Vgm - 3 years ago    Report SPAM

A wonderful find! Can't get too much Klarman. This comment might seem especially relevant to today's environment:

"One thing I want to emphasize is that, like any human being, we can discuss our view of the economy and the market. Fortunately for our clients, we don't tend to operate based on the view. Our investment strategy is to invest bottom up, one stock at a time, based on price compared to value. And while we may have a macro view that things aren't very good right now -- which in fact we feel very strongly -- we will put money to work regardless of that macro view if we find bargains. So tomorrow, if we found half a dozen bargains, we would invest all our cash."

Superguru1 - 3 years ago    Report SPAM

How does one generate 20% per annum returns with 40-50% cash?  How did he do it?

BTW, Awesome blog.

The Odd Lot
The Odd Lot - 3 years ago    Report SPAM
Thanks for your very kind words, Ashish.

How "Klarman does it" is the $20 Billion question isn't it? (Whilst your question was probably rhetorical,) If I could accurately answer it for you, I'd be managing my own Baupost!

Personally, I think Baupost's 'secret sauce' is in their legendary temperament, which combines perfectly with the strict investment hurdles they require their holdings to meet (as mentioned in the interview). For example, Seth Klarman (Trades, Portfolio) has often mentioned the fact that they buy securities factoring in doomsday scenarios (liquidations, bankruptcies, shut downs etc.). If their investments can withstand this test, then anything short of the world ending should produce handsome profits.

Superguru1 - 3 years ago    Report SPAM
I also bought securities which were safe and I think cheap but they moved like 5-10% per annum for 3 years and did nothing for two years.

I know I cannot have Seth's genius. I also know that Seth mostly plays in distressed debt just like Howard Marks (Trades, Portfolio). He hardly does common stock.

But I can have discipline and some checklist and measure that improves my strike rate.

For him to get these kind of returns he is also buying securities which move up significantly from his buy price in next 18 months or so. I think Pabrai and others also mentioned if your thesis do not play out in 18 months or so then it is time to review.

some suggestions i got so far are

a) Gurufocus suggested using Yacktmen's forward rate of return.

b) Another suggestion I got was to buy mid to lower caps. Large caps are not going to give that kind of returns unless you bought them in 2008-09 kind of crash.

What other suggestions do people have?

Please leave your comment:

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