- Aug 25, 2022
I read this book after reading The Intelligent Investor.
First of all, this book is an excellent reference book for value investing. From the content of this book, it can be seen that Klarman deeply understands the essence of value investing. A few points in particular are worth mentioning:
1. Klarman disagrees with index funds, believing that index funds are a passive acceptance of the market and a compromise to the market at a time when considerable performance cannot be achieved.
Klarman's alternative approach to investors, including buying mutual funds, does not recommend that investors buy index funds, but funds with carefully selected investment managers.
2. Klarman believes that investing is something that takes a lot of time and energy and needs to be done full-time. If that is not possible, it is better to seek mutual funds, money managers or other methods.
3. In this book, Klarman does not say much about the undervaluation of common stocks, but he does provide valuable insights into some of the more arbitrage oriented investments such as corporate spin-offs, bankrupt corporate bonds and preferred shares. Read about Klarman in Value Investing: From Graham to Buffett, which notes that Klarman does not currently invest in common stocks, but instead looks for undervalued opportunities, which can be further explored in this book.
4. Many of the book's ideas are well written, such as attitudes to cash, attitudes to liquidity, when to buy, when to sell, risk, diversification, losses, performance, etc.
I've read a lot of books on value investing, and as far as I can make out, I think there's one important reason why Graham is called the Godfather of Wall Street:
Graham is constantly exploring ways that the average investor can make a good return, that is, to change investing from a job for professionals to one that can be done by the general public.
This may not have felt like much in the past, given that many books have been written to teach ordinary people how to "play the stock market," but when you think about it now, Graham is an investment that allows ordinary people to make good returns on the basis of seeking safety (which is just part of what investing is about).
Graham's strategy for the defensive investor in "The Intelligent Investor" is one such outcome. In his late-life interview with Value Rediscovery, Graham continues to explore such methods and refine them, which is admirable.
Klarman, by contrast, is a successful investor, but he bluntly points out that if you don't have a lot of time to analyze and research, it's hard to get a good return on your own money without asking someone else to do it. I think that's an important difference.