"They spend their time looking for irrational sellers."
A fabulous collection of notes from a recent Seth Klarman speech on our Liquid Lounge board. Among other interesting points, Klarman reveals this about his group:
We have a non conventional approach to organizing our analysts. We don’t have Pharma or Oil/Gas analysts, but they’re organized by opportunity: Spinoffs, Bankruptcy, Legal, etc. They don’t waste their time keeping up on latest quarterly earnings from companies we will never invest in, but spend their time looking for irrational sellers.
This is something I've talked with numerous analysts about before. Namely, that it doesn't matter as much what you're buying/selling as long as you know who you're buying/selling from. We experienced this way back when we got China Green for Global Gains sub $3. The shares had just gotten registered, the financial crisis was upon us, and the stock was plummetnig. I knew from contacts that the reason was that many of the small funds that had participated in the PIPE were seeing massive redemptions and needed to raise cash anyway they could. They'd been prevented from selling China Green because the shares were not registered. As soon as they were, widespread selling ensued with little on the buy side since the company was so little-known. Obviously, we'd valued the company, but we were able to buy in the face of bloodshed because we knew exactly why the bloodshed was happening.
Of course, it's extrememly hard for investors to do this over and over again unless you're as well connected as Klarman is. But it's a very powerful tool if you can have it at your disposal, and I know our hope for The Motley Fool community is that we can ultimately develop it.