May 14, 2007
The Scarcity of Mispricing Opportunities
Manager Frets Over the Market, but Still Outdoes It, by G. Fabrikant
Since Seth Klarman began Baupost in 1983, it has posted an average annual total return of 19.55 percent, according to data provided by the hedge fund group. Declines have been posted in only 11 of the total 97 quarters since Baupost’s debut.
On the Web, the price for his out-of-print 1991 book — “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor” — has gone for $1,200 on Amazon and $2,000 on eBay.
Not only do I have a copy of Margin of Safety, but in a box somewhere I have the notes that I took when I read it. I should dig them out and write a “selected excerpts” post so that folks can avoid dropping a couple thousand bucks for the book — talk about a mispricing opportunity!
– via Controlled Greed –
May 14th, 2007 at 4:11 pm
Has any one ever bothered to ask him why he does not do a new edition or at least allow a reprint?
May 14th, 2007 at 4:33 pm
Steven: He doesn’t need the money, and probably likes thinking the book is something special, which of course it isn’t.
May 14th, 2007 at 9:13 pm
toby crabel’s book took a huge hit when it was circulated in the file sharing world.
surprisingly, tony oz’ book didn’t take the same hit - but i guess paying $75 or $100 (oz) is easier than crabel at 1000. although crabel’s is much drier, it’s of more interest to larger / more professional traders than tony’s book.
May 14th, 2007 at 10:00 pm
bob: I expect Maoxian’s book won’t make it far in the file sharing world either, but then again it’ll only be $50 a pop. ;-)
Speaking of Tony Oz, it would be interesting to know how much he made of his books since they were self-published.
May 14th, 2007 at 11:09 pm
Chairman, I also have notes from my reading of Klarman. Perhaps we can exchange full notes off-list, as I’d like to see how you distilled it.
May 14th, 2007 at 11:57 pm
CM: Self publishing usually costs about $10-25 depending on paperback or hard cover and size as well as if there are any color pictures or graphs.
You then simply decide the amount of royalty you want to make. So if you self publish and your cost per book is $22.50 you can tack on any amount you think the market will bear.
Here is a nice website that makes it real easy.
lulu.com
If you think about it you could easily take your archive and place it in book format.
One day when I have more time I have often thought of going to Trader Mike, Howard Lindzon, you, and a few others and take the best blog posts and compile them in an anthology. Not so much for a profit motive but more to have the ability to read and study offline.
While the web is great for access, I find the ability to open and read a book a greater pleasure.
As far as Klarman goes it is a shame if your thoughts are right. I believe in copyright as a means to protect the ability to earn, but if one does not use it I think the law should prevent waste. Although the argument could be made that one has the right not to use a copyright.
It would not be that difficult for him to digitize his book and start printing out copies using one of the sites like lulu.com. Figure about $100-200 in labor time to get the book scanned in to a computer, upload it, and then pay $30 bucks to have it printed and bound. He could then sell them for $100 a pop all day long.
As far as the book goes. When published in I think 90-91 it was probably a unique title. Pre-internet and pre Buffett making value investing popular it was one of the only tomes to describe the application of deep value investing. But today it has some nice points but does not offer anything not available anywhere else.
May 15th, 2007 at 6:37 am
Steven A.: I’ll post my notes here once I find them, which could be weeks or months (or years?) away.
Steven: Thanks for the info. on self-publishing. Looks like if I charge $50 for the book and all my dozen readers buy it I may be able to clear a couple hundred bucks. ;-)
May 15th, 2007 at 12:06 pm
Klarman is a great investor, but I doubt that he is 2x better than his fellow managers. Claiming a 50% cash position while generating nearly 20% average annual return equals 40% per anum adjusted. How he calculates his cash position is probably dubious. That he is 2x better than the likes of Apalossa and other funds that have same strategy is very difficult to believe.
May 15th, 2007 at 12:21 pm
manuel: I think those huge cash positions often show a lack of imagination as much as anything else. When Buffett buys something for $50 billion soon, I’ll shut up. ;-)