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Previously, Mr. Marks led the groups at The TCW Group, Inc. that were responsible for investments in distressed debt, high yield bonds, and convertible securities. He was also Chief Investment Officer for Domestic Fixed Income at TCW.
Mr. Marks holds an MBA in Accounting and Marketing from the Graduate School of Business of the University of Chicago, where he received the George Hay Brown Prize.
Howard Marks is also the author of a new book (released May 1, 2011), titled, "The Most Important Thing: Uncommon Sense for the Thoughtful Investor."
Topic: The Human Side of Investing, or the Difference Between Theory and Practice
Speaking to us from overseas, Howard Marks has once again given sound and timeless advice for value investors to heed. Marks began by informing us that the things being said can also be found in his recently released book, “The Most Important Thing.” The thing to take away from Howard Marks’ comments and presentation is not that the gentleman has a new book out, but the contents of the book. For starters, there is not just ONE most important thing, and as Mr. Marks makes clear; they are all pretty important as he learned over time, and incorporated into his thinking.
Marks says that the importance of being a contrarian can be quite difficult. By giving us this quote from Mark Twain, “Whenever you find yourself on the side of the majority, it’s time for reform,” Marks lets us know that independent thinking is the order of the day for Oaktree. Marks makes us aware that investor memory is a very fickle thing and prone to being underutilized by even the most well financed investor. He says “Memory, and the result prudence, always come out the loser when pitted against greed.” We find no truer statements to have been said this Value Investing Congress.
Nasim Taleb has a theory that falls in the behavior finance category, called black swans. Basically a black swan is an unknown unknown, in the words of former Secretary of Defense Donald Rumsfeld. It means that there are things individuals think they know but don’t, and things that individuals don’t know that they don’t know. It is the latter category that holds a persistent issue for individuals. Marks says that he divides investors into two categories: the “I know” school and the “I don’t know” school. He goes on to use a quote as a summary, “It ain’t what you know that gets you into trouble; it is what you think you know that just ain’t so.”
Like other well-known investors, Marks says that there are some areas of the market where they are opportunistically raising and deploying capital. However, most funds have a fairly above normal cash balance as they find it hard to find bargains for their capital to be deployed into, that offer above average returns. He emphasized that instead of diversifying for the sake of diversification, or to lay off risks that a situation may not work out or an investment may not live up to expected performance, they do an in depth research with little regard for macroeconomic events or forecast. Mr. Marks stated that there is a lot of selling and not a lot of buying in Oak Tree’s portfolio; so the cash tends to builds up until something interesting comes along.
In conclusion, the Value Investing Congress guest speaker Marks, gave great insight into a great mind and left us with more than just a bit of great advice. Marks’ book, “The Most Important Thing,” is not only a great read but a great guide as well. It is a compendium and collection that complements his presentation.
http://www.valuewalk.com/
About the author:
I am VP of Business Development for Sum Zero (http://sumzero.com), the largest community of buy-side analysts; consisting of over 5,900 hf and mf analysts, and over 3,600 extensive investment write-ups. I have prior experience in a value based pe firm focused on PIPE transactions in micro-caps, and at a value based research firm, which focused on smid caps. In my personal portfolio I have outperformed the market by a cumulative ~48% since 3/2008 (inception date). I can be contacted at jacob(at)sumzero.com for sumzero related inquires. My website is http://www.valuewalk.com/ Visit Jacob Wolinsky's Website
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