What I learned This Week From Investing Masters
3 updates in 3 minutes
Welcome back!
Today I’m sharing 3 interesting interviews or articles I recently came across and some of the key learnings I took from it.
I will be back next week with the usual format of a Guru deep-dive and a potential new Gem to look into!
1️⃣ Margin of Safety
Seth Klarman is CEO of The Baupost Group, and famous for his book ‘Margin of Safety’, a book that highlights his value investment philosophy.
He was recently interviewed as part of the ‘Talks at GS’ series:
Margin of safety is simply the idea that you want room to be wrong. A lot of things are going to happen in the world, you’re not going to be able to predict all of them. So if you buy at a big enough discount, you’ve got that built-in margin of safety. And we construct out portfolios always focusing on downside protection.
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What we do think about is how well protected is this investment or this portfolio of investments? What are the elements of risk?
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Last week I covered Howard Marks’ best-selling book The Most Important Thing.
You can also follow me on X @guru_gems for interesting Guru insights.
2️⃣ Don’t Forget Small Caps
I came across this interesting piece from Miller Value Partners on the opportunity in small cap stocks (<$2B market cap):
https://millervalue.com/dont-forget-small-caps/
“Since 1931, small cap stocks have outperformed large caps. However, during this time there have been long cycles (6-15 years) of leadership alternating between small and large caps. The current cycle has been one of the longer ones favoring large caps, now in its 15th year”
As highlighted in my deep-dive on Joel Greenblatt, an additional benefit from small cap stocks is that they are often too small for institutions and investors managing large amounts of money.
This creates potential opportunities to find hidden gems that may be lesser followed by other investors or analysts.
This is a good reminder to keep looking for small caps that could be added to my Guru Gems portfolio.
3️⃣ On Drawdowns and Recoveries
Another interesting read is the Akre Focus Fund Q2 Commentary:
https://www.akrefund.com/documents/commentary/
Akre Capital Management was founded by Chuck Akre, a long-term investing master known for his three-legged stool framework.
I covered Chuck Akre in an earlier deep-dive:
The Q2 update mostly talks about a report from Morgan Stanley on ‘Drawdowns and Recoveries’ and has some really interesting insights on the role business quality plays in terms of long-term compounding.
Per the Morgan Stanley study, high quality businesses generally compounded positively over time, even from their pre-drawdown peak. Low quality businesses, which declined more and bounced higher off the bottom, generally did not.
Even for the best performing stocks and the best performing portfolios, faith-testing drawdowns are inevitable. The Morgan Stanley study supports our long-held view that a dual focus on business quality and starting valuation are the keys to long-term compounding.
It’s well worth a read!
Finally, in this Q2 update they also share their top 10 positions as of end of Q2:
With the deadline for the 13F filings coming up, we should soon get a view on all superinvestors’ portfolios as of 30 Jun 2025.
That’s it for this week… thanks for reading and I will be back next week with a new Guru and a potential new Gem to look into!