15 Stocks Billionaire Seth Klarman Likes the Most Now

Siraj Sarwar
16 min read

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In this article, we looked at what billionaire Seth Klarman thinks about the stock market outlook, his investing principles, and what he recommends to investors. We also reviewed year to date performance of 15 stocks billionaire Seth Klarman likes the most now. You can skip our detailed discussion about Seth Klarman and jump directly to 5 Stocks Billionaire Seth Klarman Likes the Most Now.

When the S&P 500 was trading at a 52-week high two months ago, billionaire Seth Klarman, a renowned value investor and founder of Baupost Group, predicted that the markets were still in a bubble caused by ultra-low interest rates during pandemic years. His prediction is turning out to be true as the S&P 500 has plunged nearly 7% since Klarman presented a bearish outlook for the US stock market in an interview with Ted Seides of Capital Allocators. The robust uptrend of the US stock market has been halted by the Fed's hawkish stance, an increase in inflation, and lofty valuations.

"You had a bubble, it was really a credit bubble, that became an everything bubble. Super-low interest rates, at times zero rates, made capital easily available and incredibly cheap. That led to startup manias and SPACs and meme stocks and crypto, all kinds of speculative activity. I'm not convinced that we've even begun to sort out that bubble," the billionaire investor said in an interview with Capital Allocators. 

After reaching a 2023 high of 4500 points in July and surging 19%, the broader US stock market index fell back to 4200 points in the following two months as investor sentiment was harmed by the Fed's strategy of keeping rates higher for longer in order to keep inflation at 2%. According to the Fed's dot plot, there will be one more rate hike in 2023 and two fewer cuts in 2024, compared to expectations for no rate hikes in 2023 and four cuts in 2024. High interest rates already jolted the financial sector in early 2023, when several regional banks failed. The Fed's strategy of keeping rates higher for a longer time would exacerbate difficulties for the financial sector. Higher rates for a longer time will support deposit flight to market funds with higher yields. High rates also deter the growth potential of the technology and other growth sectors. 

In another interview following the publication of his edited version of Benjamin Graham's and David Dodd's Security Analysis, widely regarded as the bible of value investing, Klarman advised retail and institutional investors to revisit Security Analysis. He explained in an interview that he edited the book to emphasize how crucial it is to abide by fundamental principles of investing in order to avoid volatility. He added that it is his duty to alert investors about the risks because speculative trading has gained significant traction in the last 15 years. He does, however, think that the largest endowments and pension funds might choose to ignore his advice.

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