Seth Klarman’s value investing principles have stood the test of time
Baupost Group’s Seth Klarman, nicknamed “the Oracle of Boston,” is revered in value investing circles for his disciplined investment philosophy, maybe because his style has stood the test of time. The billionaire hedge fund manager has been an almost religious follower of Benjamin Graham’s investing style, buying out-of-favor and undervalued assets to ensure a margin of safety. Klarman has drawn comparisons to Warren Buffett — Buffett being a student of Graham’s at Columbia University — for his patient, disciplined investment style. Klarman started at Baupost in 1982 , when the firm had just $27 million in assets. It scored a 20% average annualized return for the next few decades. He posted his best year in 2017, with a 52% return, buying distressed debt and mortgage securities that had bottomed. The 66-year-old Harvard and Cornell grad published his investment book, “Margin of Safety,” in 1991. A long out-of-print cult favorite, a used copy of “Margin of Safety” now fetches almost $4,000 on Amazon . Klarman recently helped update the investment bible “Security Analysis” by Benjamin Graham and David Dodd, written in 1934 in the depths of the Great Depression. The investor, who now manages $30 billion at Baupost, last month warned of an “everything bubble” in a rare CNBC interview. He said that bubble includes cryptocurrencies, SPACs and a host of other trends that pose dangers to investors trying to keep up. Klarman hasn’t stopped hunting for bargains in neglected areas of the market. He said real estate has become a “hunting ground” for him “to buy, to inject capital, to make some rescue loans.” The hedge fund manager posted a mid-single digit decline last year, beating the S & P 500 which fell nearly 20%, the Financial Times reported. He gained $1.6 billion from hedging last year, which helped offset losses on the long side, the FT said.