How To Define Risk And How To Manage Human Bias

This is a multi part post on ValueWalk's interview with David Marcus, co-founder, CEO, and CIO of Evermore Global Advisors. In this part, Marcus discusses how he manages risk and human bias.

Q1 hedge fund letters, conference, scoops etc

Very cool, yeah, and if you just go over your … how you define risk and how you manage it?

Well, look, in terms of risk, I think about permanent loss of capital, what will cause that? How much risk are we taking to make the returns that we have, that we are trying to achieve? How do we manage the risk that we’re taking? Well, we’re trying to buy stocks that we think are substantially discounted at the valuations when we start. We’re trying to build in, you know, people like to whip around the words, you know, margin of safety so I’ll join the club. But we want a substantial margin of safety, we want a real … not just a cushion but a series of cushions. And as I said before, this whole concept of having all these catalysts or assets that are maybe for sale, non-core and so forth, to help cushion the opportunity or the path to getting the opportunity to work, and really just focusing on what can go wrong. If you look at our writeups, when we write things up internally over the last few years, the risk section for each and every investment has gotten bigger and bigger and bigger, not because we’re taking bigger risks, but because we’re focusing more and more on realizing that there’s layers of risk that maybe we didn’t think about in the past. Do we have a company that’s selling directly to China? Sure. Do we have a company that’s selling to … a French company sells to a German company that’s selling to China, whether are indirect risk exposures and so forth.


This content is exclusively for paying members. Sign up here

If you are subscribed and having an account error please clear cache and cookies if that does not work email support@valuewalk.com or click chat

Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Are you an intelligent investor?

ValueWalkPremium is a website and newsletter for smart investors like yourself. We focus on the latest hedge fund industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today for only a few dollars a day and get a 3 day no obligation trial with a targeted 20% discount coupon code.

Cancel anytime during trial and you are never charged.

Limited time offer: For first 50 subscribers