Seth Klarman :
Top three principles of Value investing:
- Think of Risk first before return.
- Think of absolute return instead of relative performance to index.
- Follow bottom up approach instead of top down.
Goal : To make money all the time, protect capital in downside and do well in the upside.
- Look for the Mispriced situation:
- stocks dropped out of S&P500 index
- investment rating has changed for a bond from investment to worse.
- upcoming S&P500 stocks which is 501
- rating for bond chances to invest
- corporate spin off due to some issue or parent company looking to get rid of people.
- Acquisition
- Mispriced situation with catalyst.
- Look for a range of values in a company.
- P/E
- Book Value
- Working capital
- Cash value / Per share
- Model the every possible worse situation before investment in stocks
- in case of auto loan, 2,8,40 % auto loan loss rate
- 40% cars sitting in dealers home
- Find out who is selling stocks
- Be careful,
- if management is selling stocks.
- if people like Steve Mandel /warren buffet is selling.
- Buy from people who don't know what they are doing.
- Some situation people just want to sell so buy in such kind of investment.
- Corporate spin off natural many seller but not buyer.
-Sell soon / Buy soon.
- If intrinsic value is too close. Don't wait for the last moment and greedy. (Before quarterly result).
- Collaborate and corporate for investment ideas since not all ideas are best all times.
- Always keep more weapons in arsenal to take advantage of mispriced situation.
- Look for situation in bond.
- Corporate debt
- Mortgage based security
- Can own building in real estate
- Can own loan on building
- CD/CLO/
- Identify an edge to outperform.
- Longest edge is long term.
- Expertise than any other crowd.
- Bad Management
- Hiring Brother-in-law or relative
- Taking advantage with free stock and options
- Poorly capital allocation.
- Paying overly to themselves.
- Leveraging too much
- Only think themselves first.
- Good Management
- Buy stocks when undervalued.
- Using stocks as currency.
- Good capital allocation.
- Using leveraging diligently.
- Community/shareholder interest
Top three principles of Value investing:
- Think of Risk first before return.
- Think of absolute return instead of relative performance to index.
- Follow bottom up approach instead of top down.
Goal : To make money all the time, protect capital in downside and do well in the upside.
- Look for the Mispriced situation:
- stocks dropped out of S&P500 index
- investment rating has changed for a bond from investment to worse.
- upcoming S&P500 stocks which is 501
- rating for bond chances to invest
- corporate spin off due to some issue or parent company looking to get rid of people.
- Acquisition
- Mispriced situation with catalyst.
- Look for a range of values in a company.
- P/E
- Book Value
- Working capital
- Cash value / Per share
- Model the every possible worse situation before investment in stocks
- in case of auto loan, 2,8,40 % auto loan loss rate
- 40% cars sitting in dealers home
- Find out who is selling stocks
- Be careful,
- if management is selling stocks.
- if people like Steve Mandel /warren buffet is selling.
- Buy from people who don't know what they are doing.
- Some situation people just want to sell so buy in such kind of investment.
- Corporate spin off natural many seller but not buyer.
-Sell soon / Buy soon.
- If intrinsic value is too close. Don't wait for the last moment and greedy. (Before quarterly result).
- Collaborate and corporate for investment ideas since not all ideas are best all times.
- Always keep more weapons in arsenal to take advantage of mispriced situation.
- Look for situation in bond.
- Corporate debt
- Mortgage based security
- Can own building in real estate
- Can own loan on building
- CD/CLO/
- Identify an edge to outperform.
- Longest edge is long term.
- Expertise than any other crowd.
- Bad Management
- Hiring Brother-in-law or relative
- Taking advantage with free stock and options
- Poorly capital allocation.
- Paying overly to themselves.
- Leveraging too much
- Only think themselves first.
- Good Management
- Buy stocks when undervalued.
- Using stocks as currency.
- Good capital allocation.
- Using leveraging diligently.
- Community/shareholder interest
