BAUPOST 2011 ANNUAL LETTER PDF

Dear Baupost Fund Shareholder,. We are pleased to report a gain . of all dividends. m arketfolly. Click here to read more hedge fund letters at MarketFolly. com. Seth Klarman Shareholder Letter March 4, at am by. I found some great excerpt from Seth Klarman’s Annual Letter (H/T to. During the financial crisis, Seth Klarman’s funds lost somewhere between 7% and . Letters – · My Favorite Quote from Baupost’s Annual Letter.

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Seth Klarman is bauposst unknown outside value circles, despite his impressive record and value of assets under management. Save it to your desktop, read it on your tablet, or email to your colleagues. According to a lecture given by Bruce Greenwald: First is Seth Klarman of 20011 Baupost Group, who you will hear from later in the course. Next is Greg Alexander. Third is Li Lu. Klarman attended Cornell University where he received a degree in economics, and later attended Harvard University where he earned an M.

Seth Klarman Shareholder Letter 2010

Klarman is a traditional value investor, looking for companies, bonds, credit instruments and real estate opportunities that all trade below what he, and his analysts believe is intrinsic value.

However, a margin of safety must be incorporated.

Operations not meeting these requirements are speculative. Like Buffett and more notably, Graham, Klarman takes the view that stocks are, at their most basic, a fractional interest in a business, not a chip in a casino. Therefore, patterns or performance cannot be modelled with any kind of accuracy, or predictability.

Indeed, Klarman has made multiple references to the short-term nature of the fund management industry, how many investment managers have become fixated on short-term performance, increasing levels of speculation as they rush to catch market moves.

In his preface to Security Analysis: Sixth EditionSeth Klarman notes how the coverage of financial markets on dedicated news networks, ferments the view that investors should have a view on everything the market is doing, and that they should be aware of every market movement.

Short clips of market movements push the culture that investment decisions can be made in under a minute.

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Seth Klarman Shareholder Letter

Of course, this makes Mr Market redundant. It has little in common with a portfolio of high-flying glamour stocks …It is to our advantage to have securities do nothing price wise for months, or perhaps years, why we are buying them.

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This points up the need to measure our results over an adequate period of time. For example, for the first half ofto October 31 the group returned 8. For the financial year ending October 27Baupost posted a 201 of When the market started to fall, Klarman profited.

In a bull market, anyone…can do well, often better than value investors. Klarman learnt his trade by reading the teachings of Graham and Dodd but over the years his strategy has changed.

In my mind, their work helps create a template for how to approach markets, annaul to think about volatility in markets as being in your favor rather than as a problem, and how to think about bargains and where they come from…The work of Graham and Dodd has really helped us think about the sourcing of opportunity as a major part of what we do—identifying where we are likely to find bargains.

But despite their invaluable teachings, Klarman actually believes that their work is now somewhat out-of-date:.

Seth Klarman Resource Page

The business climate is more volatile now. Whether or not this view is correct is up for debate. However, the developments in technology over the past 80 or so years since Benjamin Graham started teaching at the Columbia Business School, have seriously changed the way equity and debt markets operate. The availability of information has also reduced the amount of mispriced securities there are available in the market place.

People would still find it tempting to day trade and perform technical analysis on stocks. A country of security analysts would still overreact.

In short, even the best trained investors would make the same mistakes investors have been making forever, and for the same immutable reason — that they cannot help it. Leter, which is determined by ldtter flows and assets, is not. In this environment, the chaos is so extreme, the panic selling so urgent, that there is almost no possibility that sellers are acting on superior information.

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Indeed, in situation after situation, it seems clear that fundamentals do not factor into their decision making at all. While anhual is always tempting to try to time the market and wait for the bottom to be reached as if it would be obvious when it arrivedsuch a strategy has proven over the years to be deeply flawed.

Historically, little volume transacts at the bottom or on the way back up, and competition from other buyers will be much greater when the markets settle down and the economy begins to recover. Moreover, the price recovery from a bottom can be very swift.

Distressed Debt Investing: My Favorite Quote from Baupost’s Annual Letter

Therefore, an investor should put money to bauoost amidst the throes of a bear market, appreciating that things will likely get worse before amnual get better. Bond investors are often similarly constrained. We strongly believe that qnnual mentality leads to pursuit of relative rather than absolute investment returns, a direction we certainly want to avoid…A smaller pool of funds seeking to avoid meaningful declines in market value at every point in time and seeking more aggressive return objectives cannot afford to be fully invested in the absence of attractive opportunities.

In the stock market, people panic when stocks are going down, so they like them less when they should like them annuql. Investing is highly sophisticated and nuanced. The average person would have an incredibly hard time competing. How would you handle the following situation? Do you like it better? If it falls in half, do you reinvest dividends? Do you take cash out of savings to buy more? Never Miss A Story! Subscribe to ValueWalk Newsletter. We respect your privacy no spam ever.

Send me ocassional third party offers Yes No.