Back in 2008 Columbia Business School celebrated the 75th anniversary of the publication of Benjamin Graham and David Dodd’s Security Analysis.
The anniversary celebration, hosted by the Heilbrunn Center for Graham & Dodd Investing, consisted of a symposium featuring contributors to the sixth edition of Security Analysis, including David Abrams, Bruce Berkowitz, James Grant, Glenn Greenberg, Bruce Greenwald, Roger Lowenstein, Howard Marks, J. Ezra Merkin and Thomas Russo. The celebration coincided with the annual Graham and Dodd Breakfast Seminar.
The symposium consisted of three panels that focused on how the concept of value investing has evolved since the publication of Security Analysis in 1934. Though the panelists agreed that the present economic environment has presented a unique set of challenges to value investors, they affirmed that the practice’s core principles remain as relevant and effective as ever.
While the entire transcript from the symposium is a must read for all value investors, one passage in particular summed up Seth Klarman’s view on his investment process. Here is an excerpt from that transcript:
In terms of investing I would say that there is no exact formula for what we do. We try to use all the value investing principles we know. The world is imperfect. The world doesn’t just dish up net, nets all the time. The world doesn’t dish up stocks trading below cash all the time. Doesn’t deliver fine businesses at eight times earning. All the time.
So we look very hard for mis-pricing, for information asymmetries. for supply / demand imbalance, and we find ourselves at various times heavily in distress debt or no position in distress debt, significantly involved in equities and uninvolved in equities, very focused on private markets or uninvolved because you can create the same assets cheaper in the public market.
So in a nutshell that’s our approach. Very opportunistic. We try to be not siloed the way many people are. We don’t have industry analysts we have generalists who can move quickly from working one day on a drug stock, to another day on the distress debt of a bank, and another day even potentially on a mortgage security or real estate investment. That’s not easy but it does provide constant stimulation, a lot of cross training, which people enjoy, and it also means that our resources will always be deployed in the most interesting areas all the time.
So that’s Baupost in a nutshell.
You can read the entire transcript here.
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