I’m reading Klarman’s Margin of Safety. He is the first and currently only guru I have listed on the main Fusion Site, though many other deserve a place. Klarman has an incredible record. I love his dictum to “replace current holdings as better bargains come along.” Long term buy and hold is not long term buy and forget. If you are an individual investor you must be active or at least that is the easiest way to succeed.

I’ve still got plenty more to learn from Klarman, though I will never follow his exact path. I find his strong opinions that his value path is the one and only true and best path quite narrow. I see that it is a good path, but come on, get real when is anything the only right path? I would be disappointed if I’d shelled out a grand for Margin of Safety. Klarman would call the trading of his book at Amazon “trading sardines”.

I first read the notes for Margin of Safety Notes by Ronald R. Redfield. Then the index, followed by a quick scan through and now I’ve read up to chapter eight. If I met Klarman now I’d say “Fantastic book, though one small criticism. Seth, please, next time you write a book concentrate on what you do and why, not on why other things you are less informed on are rubbish. You’re an expert on value investing, discuss that. You’re not an expert on technical analysis, nor themed or momentum investing, nor any of the many other branches of investing that you simplistically write-off. Why waste time commenting on them? Concentrate on what you do well.” Klarman’s writing betrays a single minded focus and certainty of belief that I find unappealing. Still he sure does have a lot to teach and it’s defintely worth following along his path to see what parts are worth assimilating.

Up to chapter eight I haven’t read anything I haven’t read before. Even specific examples I’ve seen in other books. Did Greenblat copy Klarman or vice versa?

I am certain that time and the swing from undervalued to overvalued are the two most key, the two easiest and perhaps essential steps in investing Beyond that I see many forks and many paths that can be taken to investing success. Klarman highlights those two aspects as keys to success along with scores of other essential steps he believes one must make. I also concede that avoiding serious permanent capital loss is another step that’s close to essential. Having an informed opinion on the value of something would also seem a sensible step to include in most paths.

I’ll keep coming back to the book this week. It is a fantastic book, full of lots of excellent advice. Much of it explained in a clear enjoyable to read fashion.

For now my essential investing list is

• understand time and its power, compounding is an important subset as it is the most powerful force in investing.
• believe that prices swing between over and undervalued and find a way to consistently exploit that
• avoid serious permanent capital loss
• have an opinion on the value, even if you’re trading technically. The rougher your value the more you’re speculating and more essential other tools in the investing armoury become. All tools take time to master, though not all tools are of value.

Related posts:

1. Safety Insurance Group Inc. (SAFT) Q3 2008
2. Safety Insurance Still Trading Below Book Value
3. Safety Insurance Q3 2009 Earnings
4. Where does this path lead us?
5. Safety Insurance Group Inc. (SAFT) Waving Not Drowing