📖Seth Klarman
Margin of Safety in Valuation
Buy at significant discounts to intrinsic value.
The single greatest edge an investor can have is a long-term orientation. Value investing requires buying at a significant discount to conservative estimates of intrinsic value.
🏠 Everyday Analogy
📖 Core Interpretation
In Margin of Safety in Valuation, Seth Klarman focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：Margin of safety is the cornerstone of value investing.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Dot-Com Bubble Discipline (2000)
Klarman avoided overvalued tech stocks despite market euphoria, focusing on businesses with tangible cash flows and margins of safety.
✨ Outcome：Baupost sidestepped major losses when the bubble burst, preserving capital and outperforming many growth-focused peers.
2
Washington Post Deep Value Buy (1974)
The Washington Post traded at a deep discount to asset value amid market pessimism and regulatory fears, offering a large margin of safety for patient value investors.
✨ Outcome：Investors who bought at distressed prices realized extraordinary long-term returns as earnings grew and sentiment normalized.
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