- Apart from finding bargain investments, understanding the catalysts that will unlock value is even more important.
- Complex securities, risk arbitrage, liquidations, and spinoffs are bargain hunting territory for the value investor.
Today, we’ll look at Chapter 10 of Seth Klarman’s seminal work on value investing, Margin of Safety. Chapter 10 digs deeper into value investing and discusses complex situations.
We would all love to just run a screen, find a few cheap stocks to buy, and then wait a year or two to enjoy triple digit returns. However, as the book value of the S&P 500 is just a third of its market value, value investors are in a difficult position and therefore are forced to look for bargains in all kinds of places, dig deeper, and comprehend complex situations.
Unfortunately, if a value investment is simple to analyze, it’s also an obvious thing for other investors which limits the discount and potential returns. This leads value investors to do research into areas such as corporate liquidations, complex securities, risk arbitrage, and spinoffs. More →