Seth Klarman’s Investment Framework
Margin of safety and risk aversion is Seth Klarman’s central investment tenet. And risk aversion begins with defining a margin of safety for your investments. In his book Margin of Safety, Klarman outlines three of the best ways to build a winning stock portfolio:
· Consider the risk and downside associated with the investment before focusing on potential returns.
· Perform a bottom-up approach on individual companies while ignoring the industry and its connections with the economic cycle as a whole.
· Evaluate how the company achieves its returns and research why revenues and profits have increased or decreased year by year.
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