Investors tend to make investment decisions out of fear and greed. When the markets panic out, the sellers in a particular stock may increase. This causes the price to trend downwards, even while there may not have been any adverse impact on the company.
A true investor should always be ready to capitalise on such short-term market reactions and invest in the stock at the bottomed-out valuations. When the market prices are down, the Margin of Safety for investing in a stock increases, which concurrently reduces the investment risk as well to some extent.
Further, for Klarman, the Margin of Safety is even higher than the growth potential for a business, aiming to provide a sufficient cushion for the downside risk.