Seth Klarman on Idea Generation and Buying/Selling

Klarman talking to Jason Zweig

On Buying and Selling: We enter every trade with the idea that we are going to hold to maturity in the case of a bond and for a really long time, potentially forever, in the case of a stock. Again, if you don’t do that, you are speculating and not investing. We may, however, turn over positions more often. If we buy a bond at 50 and think it’s worth par in three years but it goes to 90 the year we bought it, we will sell it because the upside/downside has totally changed. The remaining return is not attractive compared with the risk of continuing to hold.
In our view, there is no such thing as a value company. Price is the essential determinant in ever investment equation. At some price, every company is a buy; at some price, every company is a hold; and at a still higher price, every company is a sell. We do not really recognize the concept of a value company.

On Idea Generation: We are highly opportunistic, and I will be buying what other people are selling, what is out of favor, what is loathed and despised, where there is financial distress, litigation – basically, where there is trouble. That is how we direct our search. We don’t have a crystal ball, and so we don’t know what those asset classes will be.

Here is the link to the interview

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