Thread by @BrianFeroldi

Margin of Safety by Seth Klarman

Fun talk with @asitmap and @TMFVelvetHammer last night

19 key takeaways from book:

1) Value investing isn't easy. Discipline, patience, and judgment required. Expect long periods of underperformance.

2) Investors focus on fundamentals. Speculators buy/sell based on price movements alone. Be an investor, not a speculator!

3) Don' seek Mr. Market's advice -- take advantage of its mood swings

4) Stock prices do not always reflect business reality

5) Stock market is not a place to expect quick money. Play the long game.

6) Markets move in cycles. Understand them.

7) Understand WHY by big investors underperform. They are paid to gather assets, not beat the market. A fat wallet makes investing harder. They are forced to focus on the short term.

8) Focus on downside. Avoid big loss. Don't take unnecessary risks.

9) Volatility IS NOT risk!

10) Consistent returns are superior to volatile returns.

11) Prepare for the worst. Bad times are always around the corner.

12) Focus on the PROCESS, not the OUTCOME.

13) Be patient. Wait for the fat pitch. There are no called strikes.

14) Valuation is hard and imperfect. Insist on a margin of safety

15) Be a bottoms-up investor. Focus on individual businesses, not the big macro.

16) Focus on absolute returns, not relative returns. Don't compare yourself to the market. Compare yourself to your goals! (Man do I suck at this one!)

17) Don't overpay for growth

18) Be conservative with your assumptions. Allow for upside surprises.

19) You can't know everything. Don't over research. It creates a false sense of security.

Baupost (Klarman's fund) most recent 13F:

$EBAY 14%
$LBTYK 12%
$FOXA 9%
$VSAT 7%
$GOOG 5%
$HPQ 5%
$FB 5%
$VIAC 5%
$LNG 4%
$QRVO 4%
$TBIO 3%
$MCK 3%
$TBPH 3%
$HDS 3%
$AKBA 2%
$FOX 2%
$LBTYA 2%
$NXST 2%

I'm not a pure 'value investor' myself, but there's a lot we can learn from them

Think different

Be patient

Compare yourself to your goals, not market

Make conservative assumption

Be an investor, not a speculator

All great lessons

For me, I don't like paying $0.70 for $1, only to sell at $1

That only pays off once

I'd rather pay $1.20 for a high quality $1 that later grows to become $10

That pays off multiple times

(And is far more tax-efficient)

But, I love the "focus on the downside" mindset

This is exactly why I try and find the highest quality stocks...

...trading at the most attractive valuations...

...and just consistently buy those

That strategy fits me best