CATALYSTS

“Sometimes the only thing standing in the way of a cheap stock and a profit for an investor is a catalyst that can make the market take notice. Both insider buying and activist investors can provide the push that makes the market realise a stock is good value.” Christopher Browne

“Undervalued stocks can remain under-priced indefinitely if nothing happens to them. We ask ourselves what the catalysts are that can turn around these fallen companies.” Thomas Kahn

“We need catalysts because we need to make money for our investors every year.” Steve Major

“I believe it is important to identify a catalyst that should help benefit the valuation. The approach of identifying a very cheap stock that often has been cheap for a while and then just crossing your fingers and hoping the world will wake up and be willing to assign a higher valuation one day soon is not a very effective approach in my judgement.” Lee Ainslie

“A cheap price alone is not sufficient reason to invest. If something is forever cheap, then it has no recognized value, and its stock may very well remain a worthless piece of paper. For a bargain to soar in price, there has to be a catalyst, and from an investment perspective, that catalyst is change.” Jim Rogers

“A catalyst for the realization of underlying value is something we seek, but we will also make investments without a catalyst when the price is sufficiently compelling.” Seth Klarman

“I believe definitive catalysts create a much higher-probability way to extract value over time.” H. Kevin Byun

"Passage of time at a low valuation, assuming reliable cash flows and a durable franchise ranks as an important catalyst. However we look for other catalysts as well, including asset divestitures, smart synergistic acquisitions, share buy-back programs, dividend initiations, analyst upgrades, insider buying, judicious capacity expansion in growth markets and others - the more catalysts the better." Alex Roepers

"Investors should pay attention not only to whether but also to why current holdings are undervalued. Look for investments with catalysts that may assist directly in the realization of underlying value." Seth Klarman

“Undervalued stocks are of interest when several or all of the following criteria are met; if the undervaluation is substantial; if there is a catalyst to assist in realization of that value; if the business value is stable and growing, not eroding; and if the company’s management is able and properly incentivized.” Seth Klarman

“The longer you’re in an investment, the longer you’re subject to exogenous risks. If you can influence change sooner, it increases your IRR and reduces macro economic risk." Russell Glass

“Another key element in portfolio management is curtailing the duration (the weighted average life) of one’s portfolio through exposure to investments with catalysts for the realization of underlying value. Catalytic events shift the outcome of investments from a reliance on future market multiples and macroeconomic developments (which are not at all under your control) to a dependence on your assessment of the outcomes, probabilities, and implications of announced or anticipated corporate events, including mergers and acquisitions, bond maturities, debt restructurings, bankruptcies, major corporate asset sales, spinoffs, and tender offers. No strategy can avoid all risk of loss. But we believe our approach should increase the likelihood of achieving sustainable gains with limited downside risk over the long- run. To put it differently, a portfolio of near infinite duration (such as an all equity portfolio without catalysts) can trade just about anywhere. With such exposures, if stock prices plummet, the odds go up that an investor will feel pressure to do the wrong thing and sell into market weakness. A limited duration portfolio, both because of the hopefully truncated downside in a bad market as well as the beneficial cash inflows (buying power) that catalysts usually generate, is hugely advantageous in navigating through turmoil.” Seth Klarman

“I need to have conviction in all my shorts about either a company specific catalyst or a macro catalyst.” Whitney Tilson

“While we love catalysts on the long side, we require them on the short side. Valuation shorts are always tricky.” Shawn Kravetz

"The presence of a catalyst serves to reduce risk. If the gap between price and underlying value is likely to be closed quickly, the probability of losing money due to market fluctuations or adverse business developments is reduced." Seth Klarman

"Without catalysts, any near term market prices are a random walk." Marty Whitman

"Positions with catalysts tend to lag a rapidly rising stock market and outperform a lacklustre or declining one." Seth Klarman

"In any situation, we try to isolate idiosyncratic events and find a catalyst to realize value, to accelerate outcomes. Time is risk. So the longer you are at risk, the more things that you haven’t been able to analyze can happen. You’re accelerating time frames to achieve rates of return and control risk." Jonathan Pollock

"We like seeing different catalysts. Our definition of a catalyst is something that will result in value coming out sooner rather than later. A catalyst could be a large shareholder that isn’t motivated by what the management wants and has a different interest. It could be a company that has consistently bought back shares over the years, a company that pays special dividends, or any marker that shows that the management is sensitive to shareholder return." Larry Pitkowski