The Value of Patience

Price-value gapTheoretically, with higher trading volumes, the price-value gap should narrowdue to better price discovery.   Yet, in reality, this is not the case. The increase in trading activity actually widen the price-value gap; often increasing the noise in the system and leading to spikes in volatility that we see often in the stock market. An explanation, which is not surprising, is the majority of market participants are speculators and not investors.  Rather than narrowing the price-value gap through...

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Four Steps to Prepare for a Crash

But for the sake of argument, let’s pretend that Time’s cover is wildly bullish and did send a legitimate bear signal to the world. Or maybe tapering will sink stocks. What would be the proper course of action for investors in a bear market? 1. Understand your time horizon If you invested 10 years ago for an event this year, you might seriously consider selling your stocks and converting them to cash — but that’s regardless of where you think the market is going. If you need the money in the short term, it doesn’t belong in the market....

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Nine lessons to learn from Seth Klarman

SO WHAT DO WE KNOW ABOUT HOW KLARMAN INVESTS? HERE ARE SOME INSIGHTS INTO HIS APPROACH. What’s your advantage over others?  The investment markets are crowded. Thousands of professional investors spend their days trying to find the next big thing, but they can’t all win. In order to get ahead you need to do something or know something that others don’t. This is not easy. Are you really smarter than the crowd? Buy what others are selling Going against the crowd can be profitable. People often sell assets due to temporary, short-term factors....

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Confessions of a bargain hunter, Seth Klarman

In the offices of an unmarked high-rise building in Boston sits Seth Klarman, surrounded by stacks of papers and books, which, by his own admission, are at risk of toppling over and crushing him at any instant. Klarman is the founder and president of the phenomenally successful Baupost Group, a $29 billion ”deep value” hedge fund. It has produced 19 per cent annual returns, and every $10,000 given to Klarman at inception in 1982 is worth about $1.85 million today – and this was achieved while carrying extremely high levels of cash (more than...

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