VOL. XCIV, NO. 247
BOOK BREAKDOWN
NO ADVICE
Wednesday, January 14, 2026
Advanced · 1991
Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor
by Seth Klarman · Evergreen
Baupost founder Seth Klarman's legendary out-of-print treatise on risk-averse value investing and capital preservation.
Level
Advanced
Strategies
3 types
Frameworks
1 frameworks
Rating
Target Audience
Ideal Reader
- Serious value investors seeking a modern Graham interpretation
- Investors focused on capital preservation over maximum returns
- Those interested in special situations and distressed investing
- Anyone who can find a copy (it sells for $1000+ used)
May Not Suit
- Casual investors—this is dense and serious
- Growth investors focused on momentum
- Those unable to obtain a copy
Investor Fit
| Strategy | Value Investing · Special Situations · Quality Investing |
| Time Horizon | Long-term (5+ years) |
| Asset Focus | Equities · Fixed Income |
| Math Level | Algebra |
| Prerequisites | Deep understanding of Graham/Dodd principles · Experience with fundamental analysis |
Key Learnings
- 1Capital preservation is the primary goal—returns follow from avoiding losses
- 2Margin of safety applies to all investments, not just stocks
- 3Institutional investors have structural disadvantages value investors can exploit
- 4Special situations (spinoffs, bankruptcies, liquidations) offer asymmetric opportunities
- 5Patience and discipline trump activity and cleverness
Frameworks (1)
Case Studies (2)
Thrift Conversions
Klarman discusses opportunities in mutual-to-stock thrift conversions.
Takeaway
Structural opportunities arise when sellers are not price-sensitive.
⚠ Dated example
Bankruptcy and Distressed Debt
Analysis of opportunities in distressed securities.
Takeaway
Forced selling creates opportunities for patient, contrarian investors.
✓ Still relevant today
Notable Quotes
“Value investing is at its core the marriage of a contrarian streak and a calculator.”
“The single greatest edge an investor can have is a long-term orientation.”
“Loss avoidance must be the cornerstone of your investment philosophy.”
Mental Models
- —Capital Preservation First
- —Institutional Imperative
- —Absolute vs. Relative Returns
- —Margin of Safety (Extended)
- —Catalysts and Timing
Key Terms
No glossary terms documented for this book.
Limitations & Caveats
Keep in mind
- •Book is extremely rare and expensive to obtain
- •Some specific examples are dated (1980s thrift conversions)
- •Klarman's approach requires significant capital and expertise
- •May be too conservative for aggressive return seekers
Related Books
Reading Guide
Priority Reading
- Chapter 6: Value Investing Philosophy
- Chapter 8: The Art of Business Valuation
- Chapter 11: Investing in Distressed and Bankrupt Securities
Ratings
Concept Tags
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