The VALUE Scorecard

Seth Klarman has returned over 20% per year since 1982 managing $27 billion. His book sells for over $1,000 secondhand. The core idea fits in one sentence.

Buffett's bridge analogy explains margin of safety better than any formula: you build for 30,000 pounds, then drive 10,000-pound trucks. The math behind this approach uses three independent valuation methods.

Klarman bought Enron's bonds at pennies on the dollar after the fraud collapsed the stock. The uncertainty was about timing, not about whether he would get paid. The annualized return exceeded 15%.

Michael Burry's entire research budget was $100 per year. One subscription to 10-K Wizard. No Bloomberg. No team. Just SEC filings and patience. His fund returned 489% net while the S&P 500 was negative over the same period.

Burry charged no management fee. His investors paid only actual expenses, typically below 1% of assets. To earn his first dollar, he had to make their money grow. The incentive structure explains why he only bought when he saw a real catalyst.

Joel Greenblatt documented the specific situations where catalysts are predictable: spinoffs where institutional investors are FORCED to sell regardless of value

The warning from one of the greatest value investors: if you cannot tell whether or when you will realize underlying value, you may not want to get involved at all

John Templeton paid cash for every car and every house he ever bought. The only time he borrowed money to invest was the 1939 trade. The Great Depression taught him what overleveraged people look like when credit dries up.

Three modern metrics replace Graham's 1934 debt criteria and can be checked in under five minutes on any public company. Each one answers a different question about survival.

During the 2020 pandemic, airlines with heavy debt collapsed 70-90%. Airlines with clean balance sheets in the same industry recovered faster. The cheapest stocks during the crash were often the ones with the most debt. Buying them felt like value investing. It was speculation on survival.

Berkshire Hathaway paid $25 million for See's Candies in 1972. The company had $8 million in tangible assets. Graham would have called it expensive. Over the next fifty years, See's generated over $2 billion in cumulative pre-tax earnings.

Charlie Munger's single most important contribution to value investing: why a wonderful company at a fair price beats a fair company at a wonderful price. The math behind this claim.

A researcher studied mean reversion in corporate profits over multiple decades. A tiny handful of companies maintained unusually high returns. He could identify them after the fact. He could NOT predict them in advance.

Why this criterion matters MORE in 2026 than it did in 2015 (and how higher interest rates separate the real compounders from the pretenders)

Mohnish Pabrai built a billion-dollar fund on one Gujarati word. It means "low risk, high uncertainty." Wall Street treats these as the same thing. Pabrai profits from the difference.

The "few bets, big bets, infrequent bets" framework with the specific sizing table from Pabrai's book. Eight bets. Each one sized by conviction. Total exposure: 400 units.

Pabrai's cloning strategy copies the positions of verified great investors through public 13F filings. The obvious question: if it works this well, why doesn't everyone do it?

The specific upside-to-downside ratio BELOW which a position isn't worth taking (and how to calculate both numbers before you buy)

Warren Buffett avoided technology stocks for decades even though Bill Gates was a close personal friend. He watched the dotcom boom from the sidelines. He also avoided Enron, WorldCom, and Pets.com.

A study of 66,000 brokerage accounts found that the most active traders (the most confident in their knowledge) underperformed the least active by 6.5 percentage points per year. Confidence is not competence.

The meta-criterion: if you can't explain how a company makes money without looking at a research report, the other nine criteria on the scorecard are unreliable. This chapter explains why.

The complete 100-point scoring system with specific weights for each of the ten criteria. Moat and Margin of Safety carry the most weight. Circle of Competence acts as a circuit breaker.

Two stocks in the same industry, same valuation level. One scores 82. One scores 31. The cheaper stock is the WORSE investment. This chapter shows exactly why.

The quantitative proof: separating the cheapest stocks into high-quality and low-quality portfolios concentrates the value premium in the high-quality group. Cheap alone is not enough.

The three most common scoring mistakes (anchoring on one criterion, confirmation bias, skipping circle of competence) and how to catch yourself making them

Benjamin Graham's warning that every value investor learns the hard way: undervaluations can persist for an "inconveniently long time." The three categories of value positions and which one the scorecard is designed to avoid.

Professional traders displayed MORE loss aversion than graduate students in a controlled experiment. The more often they checked results, the worse their decisions. The frequency of evaluation changes behavior.

The behavioral edge in 2026: in a world of real-time notifications and AI-driven trading, patience is the one competitive advantage that CANNOT be automated