Klarman Holding 50 Percent Cash

[Buckeye]

Hahaha, good one.  

[Gregmal]

I’ve long called him a bullshit artist. For all his supposed brilliance, he’s held stupid amounts of cash for more than a decade and showed off his stock picking prowess with that decade plus long Viasat position which has lost what? Like 80%?

[thepupil]

if i am triangulating my various sources all correctly, he's done about 13%/yr for 41 years, net of 1.5% and 20, $1--->$145 net. Probably like 17%/600x gross. he did well for many years, including through and immediately after GFC and has sucked since 2015.

 

His reputation is deserved and he made himself and others a shit ton of money.

 

Probably safe to say he should have hung it up earlier...but i get it...sometimes you ust got to own a few race horses and sports teams.

[Dinar]

1 hour ago, thepupil said:

if i am triangulating my various sources all correctly, he's done about 13%/yr for 41 years, net of 1.5% and 20, $1--->$145 net. Probably like 17%/600x gross. he did well for many years, including through and immediately after GFC and has sucked since 2015.

 

His reputation is deserved and he made himself and others a shit ton of money.

 

Probably safe to say he should have hung it up earlier...but i get it...sometimes you ust got to own a few race horses and sports teams.

Not to criticize Klarman, but it was a lot easier to make money from 1983 to 2008, than from 2009-2024.  I remember buying ASR at 5x FCF in 2004, IBA (Mexican chicken) below cash and it would have been a 5x if the stock just gone to 10x EPS, distressed debt opportunities were insane in 1998-2003, incredible number of good, old economy stocks were incredibly cheap in 1999-2000.  Let's not forget making money in savings thrift conversions.  I was not around Wall Street in 1983 but you can look up valuations in 1983.  I think if you look at S&P 500 return 12/31/1983-12/31/2024,  it was better than 13% per annum.    

 

[thepupil]

1983-2024, SPX did 11.8%

 

He did 16.5% from 1983 - 2008, market was 10.1%/yr. On a gross basis he probably did like 20%/yr for 25 years on a growing capital base, which is "legendary" in my view. And it certainly seems like it was a lot easier to make money when you read about stuff that they and other value people did, but I wasn't there, so I'm sure some of it is hindsight. 

 

He absolutely deserves criticism for last 10 years. too big, too diversified, too much cash, too big of a team, too high fees, too conservative, not good at picking stocks, shitty at real estate.

 

Criticize away! 

 

 

Edited Friday at 10:32 AM by thepupil

[Saluki]

5 hours ago, thepupil said:

1983-2024, SPX did 11.8%

 

He did 16.5% from 1983 - 2008, market was 10.1%/yr. On a gross basis he probably did like 20%/yr for 25 years on a growing capital base, which is "legendary" in my view. And it certainly seems like it was a lot easier to make money when you read about stuff that they and other value people did, but I wasn't there, so I'm sure some of it is hindsight. 

 

He absolutely deserves criticism for last 10 years. too big, too diversified, too much cash, too big of a team, too high fees, too conservative, not good at picking stocks, shitty at real estate.

 

Criticize away! 

 

 

 

I feel sorry for the super fans who cloned his 13Fs based on his reputation.  They are the real victims here!  

 

To be fair, 2009-2020 was the longest bull market in history, and it was hard to find any traditional value guys that did well there.  Even now, with the SP500 being cap weighted and dominated by the magnificient 7, there is stuff that is incredibly cheap but underperforming.  CROX at less than 8x earnings?  And if you are willing to go small cap, some of the stuff is baffling.  Taylor Devices at 12x earnings and 25% of the market cap is cash?  PETS where the cash and real estate equal the market cap and the rest of the business is free? And pretty much everything that floats is trading for less than NAV.   And energy is a graveyard for performance too.  

 

I think if you ran a family office, and you are picking up a lot of these beaten down names at good prices, you will do well even if Nvidia and the other stocks continue to do well. The problem is that he's not a family office, and he's charging fees for a long period of underperformance. And he has a big team of people doing research and making trades, so it's puzzling because he's not a one man shop who is just phoning it in. 

 

I have money in the index through my work 401k, so I'm not hoping for a correction, but if the cap weighting causes it to become a momentum strategy (people buy because it's going up, and more buying makes it go up more, which invites more people to buy), then my concern is what happens when that reverses and the momentum is the other way.  2008 or 2020, which will it look like? 

[Longnose]

On 6/29/2024 at 9:46 AM, Cevian said:

I have my doubts on whether Baupost has really outperformed over time.

 

I think Seth is a marketing genius though. For instance, I don't believe he himself has ever said he has outperformed the market but, somehow, such image has been built slowly over the years. 

 

I remember an interview for example where he implied it was a conscious decision not to re-publish his book "Margin of Safety" since it had a cult-like following and had been a good marketing tool. Also, the secrecy behind the annual letters, the "leaks" that happen from time to time, going after websites which publish the letter, has created this aura of mystery and genius. Every interview starts with "Legendary Investor" but, again, he's never claiming that but the interviewer on CNBC.

 

I would love to be proven wrong if his annual performance numbers were ever revealed.

 

As with other investor who are, wrongly, seen as investor gurus, the only reason it bothers me is because it dupes people into investing with them for the wrong reasons.

 

To me its a similar story to Mr Pabrai. I personally have nothing against either of them and I am exteremly grateful for the knowledge and contributions they have added to the world.  Do i think they out perform? would I trust them with my money? No. But no everyone wants to invest their own money. In some ways its kind of like religion. They dont always practice what they preach. But what they preach isn't necessarily wrong. 

 

I will always make my own decisions and I am grateful for the content they have published into the investing world. 

[Gregmal]

10 minutes ago, Longnose said:

 

To me its a similar story to Mr Pabrai. I personally have nothing against either of them and I am exteremly grateful for the knowledge and contributions they have added to the world.  Do i think they out perform? would I trust them with my money? No. But no everyone wants to invest their own money. In some ways its kind of like religion. They dont always practice what they preach. But what they preach isn't necessarily wrong. 

 

I will always make my own decisions and I am grateful for the content they have published into the investing world. 

I don’t think Klarman can be credited with contributing much to the investing world. He has been deliberately secretive and even goes after people for trying to be transparent about his operations. This after publishing a book, for publicity, only to then go out of his way to make that book inaccessible and hard to get, presumably for marketing purposes. 

[Longnose]

I read the book and I believe it to be of value to anyone learning about investing. 

 

Is it dense like security analysis by graham? no. But its a good read and full of "wisdom" even if it was just a good marketing ploy. Its still a net positive. 

 

 

[thepupil]

17 minutes ago, Gregmal said:

I don’t think Klarman can be credited with contributing much to the investing world. He has been deliberately secretive and even goes after people for trying to be transparent about his operations. This after publishing a book, for publicity, only to then go out of his way to make that book inaccessible and hard to get, presumably for marketing purposes. 

 

isn't this the default for all institutional managers? 

 

how much transparency do you have into these organizations? (just taking a random wiki of large "HF's" )

 

 

 

Edited Friday at 07:00 PM by thepupil

[Gregmal]

3 minutes ago, thepupil said:

 

isn't this the default for all institutional managers? 

 

how much transparency do you have into these organizations? (just taking a random wiki of large HF's)

 

No ones claiming any of those firms have made any meaningful contributions to the investing world. Most are just grubs. Seth is a grub. Pabrai at least makes an effort, even if you question his motives. 

[boilermaker75]

21 hours ago, Blake Hampton said:

 

It really is a good book, I'm sorry Seth.

 

 

I read the book a long time ago. My recollection is that I didn't get what was so great about it. Maybe I need to reread it.

[thepupil]

1 hour ago, Gregmal said:

No ones claiming any of those firms have made any meaningful contributions to the investing world. Most are just grubs. Seth is a grub. Pabrai at least makes an effort, even if you question his motives. 

Fair enough.

 

i think for vast majority of  $ managers goal should be to contribute absolutely nothing to the world and to make your LP’s lots of money. 
 

klarman did well with that for 25 years, and poorly the last 10 or so.

 

but I don’t really think he can be blamed for the “secrecy” since it’s basically standard operating procedure for 99/100 funds that don’t take retail $$$.

 

 

[villainx]

I always thought Klarman as a genius.  But the last time I seriously did any search on him was ... 10 years ago.  But yeah, lots of supposed legends have shown themselves to be recent underperform-ers.

[Viking]

I get why people wanted to invest with organizations like Klarman/Baupost in the old days - there were few good alternatives. But today people have a guaranteed way to outperform 80% of all professionals (over a 10 year timeframe) - simply buy a broad based index fund like VOO. 

 

The rub is you have to be able to tolerate volatility - you can't panic and sell when the market sells off 30 or 40%. 

[Blake Hampton]

I think ZIRP has really screwed up a lot in the investment world. You have a real disadvantage when your competition is willing to leverage itself to the sky and you're not, especially when rates remained so low for so long. That said, I do think there were a lot more opportunities pre-2020 where you could've made a bundle. I think it's gotten a lot more difficult since then.

[Blake Hampton]

1 hour ago, boilermaker75 said:

I read the book a long time ago. My recollection is that I didn't get what was so great about it. Maybe I need to reread it.

I printed a PDF of it out and stuffed it into a binder. I can't remember specifics but the general ideas seemed pretty good. Most of this stuff essentially just sounds like Buffett, which is why I probably liked it.

 

Edited Friday at 09:17 PM by Blake Hampton

[Malmqky]

Yeah aftermath of 2001 and 2009 gave great opportunity, all you had to do was have some guts and faith. 2020 too tbh.

 

End of the day though, absolute returns are all that matters. A decade of extreme underperformance is unacceptable. Idc how you try to justify it.

[boilermaker75]

15 minutes ago, Blake Hampton said:

I printed a PDF of it out and stuffed it into a binder. I can't remember specifics but the general ideas seemed pretty good. Most of this stuff essentially just sounds like Buffett, which is why I probably liked it.

 

 

I did the same thing, printed a pdf and put it is a binder.

 

I agree, I guess I was looking for something new and why I was disappointed.

[Blake Hampton]

I don't know about you all but I'm a Buffett fiend. That guy has had more impact on my way of thinking than my own Dad, not kidding.

 

Simply copy and pasting him stokes my interest.

 

Edited Friday at 09:37 PM by Blake Hampton

[Lazarus]

Blake - your pessimism and concern about politics and macro events is the antithesis of Buffett.  

[Blake Hampton]

Just now, Lazarus said:

Blake - your pessimism and concern about politics and macro events is the antithesis of Buffett.  

Never said I WAS him,

 

and I assure you he's concerned right now.

 

Edited Friday at 10:14 PM by Blake Hampton

[Lazarus]

Buffett on politics and macro:

 

"We’ve faced wars, recessions, and political upheavals over the decades, but the U.S. economy keeps advancing. Don’t let fear and headlines steer your investing."

 

"The macro outlook is always uncertain. The world is always uncertain. The key is to focus on what you can understand and control—like evaluating businesses."

 

"If you mix politics with your investment decisions, you're making a big mistake."

 

Or if you prefer the bluntness of Charlie Munger:

 

"If you're not willing to ignore politics, you’re not cut out to be an investor. Politics is temporary; good companies endure."

 

"We don't spend any time thinking about macroeconomic factors. We just try to find great businesses at good prices."

 

"The constant doom and gloom predictions have been wrong for decades. Bet on human ingenuity and progress—it’s the safest bet you can make."

 

As an investor, it pays to be stupidly optimistic. 

 

 

[Blake Hampton]

Just now, Lazarus said:

As an investor, it pays to be stupidly optimistic. 

I heard somewhere that Dick Fuld was stupidly optimistic.

[73 Reds]

8 minutes ago, Lazarus said:

Buffett on politics and macro:

 

"We’ve faced wars, recessions, and political upheavals over the decades, but the U.S. economy keeps advancing. Don’t let fear and headlines steer your investing."

 

"The macro outlook is always uncertain. The world is always uncertain. The key is to focus on what you can understand and control—like evaluating businesses."

 

"If you mix politics with your investment decisions, you're making a big mistake."

 

Or if you prefer the bluntness of Charlie Munger:

 

"If you're not willing to ignore politics, you’re not cut out to be an investor. Politics is temporary; good companies endure."

 

"We don't spend any time thinking about macroeconomic factors. We just try to find great businesses at good prices."

 

"The constant doom and gloom predictions have been wrong for decades. Bet on human ingenuity and progress—it’s the safest bet you can make."

 

As an investor, it pays to be stupidly optimistic. 

 

 

Yeah, there are a dozen or more investment ideas floated around this board every day.  Worrying about macro issues, politics or anything for that matter that is outside of your control is pointless.  Anyone who "accurately predicts" a significant macro event and profits by holding cash into that event is nothing but a one hit wonder.