加载中…塞思·卡拉曼的智慧(4)
(2009-12-11 19:40:54)
标签：
塞思·卡拉曼杂谈 |
分类： 价值投资大师及言论 |
感谢www.distressed-debt-investing.com
Wisdom from Seth Klarman - Part
7
Dec. 08, 2009
Last time, in our Wisdom from Seth Klarman series, we grabbed
quotes and commentary from Baupost's 2007 Annual Letter. In this
edition, we continue with the 2nd half of the 2007 letter. As usual
expect some gems from Klarman - who I consider the best hedge fund
manager out there.
While investors will obviously achieve the best result by remaining rational thinkers at all times, this is easier said than done. In the financial markets, emotion often takes over, and greed and fear come to dominate investor behavior. Even those who are aware of this, who expect always to invest rationally and to be able to resist their own greedy temptations and panicky reactions, cannot always carry through on their plans.
A top-down or momentum investor - especially if leveraged - is at a loss when confronting the unexpected. Should they hang on and risk ruin, or capitulate and lock in painful losses? Even those with the benefit of a value investing roadmap - which ensures a fundamental, long-term oriented approach to investing, a disciplined pursuit of bargains, and an imperative to view the market as an irrational creator of opportunity - may blink when faced with the unexpected. When you buy bargains, and they become far better bargains, it is easy to question yourself, which can impair your judgement. Real or imagined concerns - about client redemptions, employee defections, and even a firm's viability - can greatly influence behavior away from the rational.
One of the concepts that so impresses me with Klarman's investment approach is his position that some buyers and sellers are irrational and it his his job, at Baupost, to capitalize on those investment opportunities. I remember him buying a number ofMLPs which were believed to be widely held by Lehman Brothers - as Lehman's prop book unwound, this created uneconomic pressure on the stock - i.e. the connection between price and value disintegrated for no reason other than Lehman had to dump the stock on the market. I know he has also talked about in speeches at Columbia that Baupost has an analyst who's sole job is to follow index additions and deletions...That blew my mind.
Every day, every investor squints into the murkiness of present-day ambiguity and an unknowable future and has to make decisions. Even when these decisions are made for the right reason-not based on greed, not under undue pressure, not from intellectually dishonest motives, but because the investments appear sound and secure - much can still go wrong. Despite a strong first 25 years, our performance in the years ahead is unknowable; however, with aligned interests, a long-term approach, sound judgement, a keen sense of risk aversion, a nose for value, valuable experience on the front lines, an unwavering alertness, a successful result seems reasonably likely.
This is such a wonderful quote statement because it lays out what
Klarman believes are the requirements for success for a hedge fund.
IMO Aligned interests is so important: I.E. You eat your own
cooking. I believe Baupost's employees are the largest holders of
the fund.
He continues:
He continues:
We tried to remember that investing is a marathon and not a spring, and we conditioned ourselves to go the distance.
We have consistently prepared for the worst, incurring significant hedging costs on an ongoing basis. Sometimes these were designed to protect single investments, and other times they provided downside protection for the broader portfolio. While many of our holdings did not truly require hedges in order to be attractive, and while many of our hedges ultimately proved unnecessary because the anticipated risks failed to materialize, our hedges were quite valuable as enablers, in that they gave us the comfort and the confidence to, at times, incur fairly concentration positions that have produced such excellent long-term, risk adjusted returns forBaupost.
That first quote, about investing being a marathon, is something I pound on repeatedly on this blog. It is so important, especially when allocating outside capital, to remember that the rug could be pulled out from under your whenever those quarterly redemptions hit. A string of big numbers multiplied by zero is equal to zero. Do not lose money. That is the first rule.
And on hedging: That is one of the reasons I believe looking at Baupost's 13F is somewhat a futile effort. Their equity portfolio is so small relative to their assets under management that it would be impossible to mirror the performance. Further, you have no idea what hedges have been put in place, or whether being long News Corp was just a dual-class arbitrage play.
I am going to make it a mission of mine to better understand how they hedge individual investments. Would they for instance go long a distressed bond and long a put on the equity? Or long an equity and long credit protection? I'll report back when I have more information in the future.
Our strict value discipline has been a critical component of our success.. When you have carefully analyzed what you own, and buy at a sufficient discount to underlying value to ensure a significant margin of safety, you are likely to do well. Our willingness to hold cash during fallow periods has enabled us to maintain a strict sell discipline regardless of whether we had anything promising to replace what we sold. This view on cash, combined with a truly long-term investment perspective, has also enabled us to avoid the gun-to the-head mentality that pressures many investors to own less than stellar investments.
Cash is king? One complaint I hear from a number of my peers is
that fact that their portfolio managers abhor holding cash -
especially now the expectations for inflation are sky high. And I
understand the reasoning that if you are not fully invested, and
the market rips, you will get redemptions. I believe if you can
manage your investors expectations better (i.e. like 1950s Warren
Buffet), you would be able to use cash as a valuable asset versus a
potential liability.
And my favorite quote thus far in all of the series:
And my favorite quote thus far in all of the series:
We have a culture of intellectual honesty and curiosity, always looking for more information to confirm a thesis or disprove it; never settling for good-enough investments, but always striving to find the best ones; not satisfied with the knowledge that our investments are bargain-priced but always searching to discoverwhy they are undervalued so as to remove as much risk as possible from the investment equation. We strive to eliminate biases in our decision-making that could cause us to reject new information or cling to erroneous beliefs. We pride ourselves on making tough and sometimes painful decisions to exit from investments where prospects have soured. This curiosity extends fully to the operations side of Baupost, where we always want to find smarter and more effective procedures and processes, to identify new ways to serve our clients better, and to know not only that something is the case but why it is so.
Stay tuned for future editions of our Seth Klarman series - we will
analyze a few videos and audios of Klarman speeches. After that we
will look at the 2008 Baupostletter (but only after the 2009
Baupost letter is published).
1.10.2010
Wisdom from Seth Klarman - Part 8
This is our 8th edition of Wisdom from Seth Klarman. In this edition, we will analyze the 2008 Baupost Annual letter. This, like other parts of the Seth Klarman series, will be split into two posts.
If anyone ever asks you why the "Great Recession"
transpired:
"The implosion of the subprime mortgage market in 2007 let to losses that ultimately precipitated a collapse of financial institutions and markets and nearly the system itself. The 2008 financial market sell-off accelerated into a panic after September's Lehman Brothers bankruptcy filing, as no one could figure out who was, or would remain solvent. Selling by financial institutions, desperate to rein in their balance sheets, put sustained pressure on securities prices. Strategies that relied on leverage were the first to fail as the downdraft triggered margin calls. Dismal investment performance drove redemptions from equity and debt funds alike, necessitating further selling, and thereby creating a downward spiral that overwhelmed investment fundamentals. With the exception of mispricings that have ensued, this is actually value heaven; it just feels like value hell."
Incredible right? You can take that one to the bank.
"In today's unforgiving environment, buying anything has become so punishing that few (we are one of the few) want to do it any more. Numerous competitors have gone into hibernation or become extinct, victims of the market selloff, investor redemptions, or margin calls. Even those with capital, unsure of their staying power, seem unwilling to invest it. Holding cash, which would have been a far better idea had people thought of it when prices were at their highs, is now in vogue."
It is so interesting to me. So many of the great investors
(Klarman, Buffett, Icahn) all espouse the
benefits of holding cash. Many investors (whether that be of the
advisory or even the corporate side) look up to these people. But
nonetheless, so few are committed to holding cash as a strategic
asset. Whether it be the "institutional imperative" to always be
fully invested or the fact that it is difficult to defend to
stakeholders being only 50-60% long when the market is going up, it
seems like so few people feel comfortable holding excess cash.
Think of all the corporations that bought back stock in 2006 and
2007, only to see their stock prices down 50-80% ... think of
deploying all that capital at early 2009 levels - now that is a
smart capital allocation choice.
"It is easy for the volatility of one's thinking to match the volatility of prevailing conditions. Time horizons have shorted even more than usual, to the point where the market's 4:00 p.m. close seems to many like a long-term commitment. To maintain a truly long-term view, investors must be willing to experience short-term losses; without the possibility of near-term pain, there can be no long-term gain. The ability to remain an investor (and not become a day-trader or bystander) confers an almost unprecedented advantage in this environment. The investor's problem is that this perspective will seem a curse rather than a blessing until the selloff ends and some semblance of stability is restored."
I remember the "dark days" of late 2008, when literally a bond
would be quoted down 20 or 30 points on no news. Nothing. Everyone
always blamed Lehman's prop desk from blowing out a position. But
really - there were no buyers. So few of us were pounding the table
saying things like: "Listen - I know the markets are trading like
the world is coming to an end - But if I can create HCA through
the bank debt at at 2x EBITDA, the upside-downside on that
trade is out of this world and one we may never see again in our
life times."
"Warren Buffett has said - and other have endlessly repeated - that you can't tell who is swimming naked until after the tide goes out. This turns out to be only partially true. The tide has receded, and most portfolios are down. But not all declines are equal. Some investors have lost money and locked in those losses by going to cash. Some have made investments in failed or failing banks, brokers, and homebuilders, or toxic subprime mortgage securities; these losses are largely permanent and irreversible. But the investment baby has been thrown out with the bathwater, and some who invested wisely aren't naked, it just seems that way. Buying early on the way down looks a great deal like being wrong, but it isn't. It turns out you won't be able to accurately tell who's been swimming naked until after the time comes back in.As Benjamin Graham and David Dodd taught us, the financial markets are manic and best thought of as an erratic counterparty with whom to transact, rather than as an arbiter of the immediate accuracy of one's investment judgement. There are days when the market will likely overpay for what you own, and other days when it will offer you securities at a great discount from underlying value. If you look to 'Mr. Market' for advice, or if you imbue him with wisdom, you are destined to fail. But if you look to Mr. Market for opportunity, if you attempt to take advantage of his emotional extremes, then you are very likely to succeed over time. If you see stocks as blips on a ticker tape, you will be led astray. But if you regard stocks as fractional interests in businesses, you will maintain proper perspective. This necessary clarity of thought is particularly important in times of extreme market fluctuations."
There folks, are two of the greatest paragraphs on investing
that I have ever read. Klarman has written extensively on the
problem of "catching a falling knife" in investing...i.e value
investors tend to buy early. But in the end, we have to stick by
two truths: 1) None of us can consistently call the bottom 2)
Buying a dollar for 50 cent as opposed to buying a dollar at 30
cents, is still better than buying a dollar for 90 cents. If we
come from a position of strength (with cash and with capital that
will not flee at every rocking of the boat), and practice the
tenets of value investing, we should come out on top.
"Most investments - illiquid private transactions, but also publicly traded stocks and bonds - are like roach motels, easier to get into that out of. When you make an investment you give up liquidity and valuation certainty of holding cash. You do so, presumably, to earn a higher return while accepting the risks of diminished liquidity, price volatility, and fundamental value impairment. To be successful, you must maintain the thought process articulated by Graham. When a seemingly attractive investment suddenly retreats in market price in the absence of adverse fundamental development, you must have the psychological makeup t see it as more, not less attractive. If you have either investment constraints or flighty capital which makes it impossible for you to favor an investment more after its price falls, then you shouldn't be investing at all."
Theoretically this is fantastic. But most of us do not have a
25+ year track record to lock investors in. I have a theory on the
best way to accomplish this and am working on some practical
applications for it - more detail in the future.
Later in the week, will discuss more of the
2008
Baupost
annual letter. It really provides
some fantastic investing lessons.
喜欢
0
赠金笔