Warren Buffett Disciple Shares Tips On Value Investing: 'Everybody Appreciates A Bargain'

Zinger Key Points
  • Seth Klarman is a value investor who has followed in the footsteps of Warren Buffett.
  • A past interview saw Klarman share his take on value investing.

Billionaire investor Seth Klarman is known for sharing similar principles in value investing to legendary investor Warren Buffett.

In a previous interview, Klarman shared praise for Buffett and for the overall value investing strategy they have both popularized.

Klarman's Advice: Klarman, who is the author of "Margin of Safety," doesn't do too many public interviews. Klarman’s 2011 interview with Charlie Rose, which featured his take on value investing, resurfaced on social media.

The billionaire investor said the idea for his book came when a former classmate asked him about writing a book about investing. The book initially didn't sell well but gained a cult following, Klarman told Rose.

Klarman said the book was meant to be accessible to the professional entering the field, using layman's language.

The investor said Buffett summed up value investing well over the years.

"I actually think there's a gene for this stuff," Klarman said of value investing.

"Everybody appreciates a bargain, " said the investor and Baupost Group CEO, who added, "When the market's going down, most people get scared and overreact."

Klarman said people get excited when clothes go on sale and they can buy them at a discount and questioned why it's not the same for stocks.

"For me, it's natural."

Klarman said others can't grasp it as they are fighting human nature. The important thing to remember is stocks are fractional interest in a business, Klarman added.

"I can buy this thin for a huge fraction of what it's worth."

Klarman said investing is the intersection of economics and psychology.

"Value investors have to be patient and disciplined."

The investor also said value investors need to balance arrogance and humility because any time they buy something it could be an arrogant act of thinking the item is worth more than what they are paying for it.

Related Link: How To Invest Like Seth Klarman

Why It's Important: Buffett and Klarman are both disciples of legendary investor Benjamin Graham.

Klarman wrote the preface of the sixth and seventh editions of "Security Analysis: Principles and Techniques," a book by Graham.

Buffett is also said to keep a copy of "Margin of Safety" on his desk in his office. The book takes its name from the 20th chapter of "The Intelligent Investor," a book by Graham that is considered a must-read for finance professionals.

"I don't think Warren needs to read it anymore," Klarman said with a laugh.

Klarman said Buffett has a better eye on what makes a great investment.

"I think Buffett's a better investor than me."

Klarman said he doesn't root for bad times or the market to go down, but it can provide good investment opportunities.

The investor said seeing the market go up and up can be frustrating. Klarman said the little guy gets sucked into investing when the market is going higher and higher and hears stories from people making money easily.

"People get in and out at the wrong time."

Read Next: Legendary Investor Seth Klarman Praises Coinbase, Calls This Sector A ‘Hunting Ground’

Photo: Kent Sievers on Shutterstock.

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Posted In: EducationBaupost GroupBenjamin GrahambooksCharlie RoseMargin of SafetySeth KlarmanThe Intelligent InvestorValue InvestingWarren Buffett
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