Howard Marks' Investing Strategies & Lessons cover

Howard Marks’ Investing Strategies & Lessons

Howard Marks, born during the 1940s, is a renowned investor and writer in the United States of America. In 2017, he was ranked the #374 richest person in the United States, with a net worth of $1.91 billion by Forbes.

During the early part of his career, Howard Marks worked with Citibank in senior positions. In the year 1985, he joined TCW where he created high yield, convertible securities, and distressed debt groups and led them all by himself.

After working in TCW for a decade, Howard resigned and eventually founded Oaktree Capital Management in Los Angeles with five partners. Interestingly, the partners of Howard in Oaktree are all ex-employees of TCW like him. The Asset Management Firm of Marks started growing in size and operations at a rapid pace with the passage of time. Oaktree focused on distressed debt, high-yield bonds, and private equity. Mr. Howard is currently the Co-chairman of the organization.

He is also a very popular personality among finance enthusiasts in the US and the world. His detailed discussion on investment strategies and insights into the US economy is known as “Oaktree memos”. It contributed highly towards his popularity among the investing community across the world. He has also authored several books on investing which are quite famous around the globe like Mastering The Market Cycle: Getting the odds on your side The Most Important Thing: Uncommon Sense for The Thoughtful Investor.

Investing strategies of Howard Marks

Let us have a look at some pointers which would help you understand the investing philosophy of this famous billionaire investor. 

1. Be a contrarian investor: Howard Marks stated that your behavior as an investor towards the financial market should be different from the other retail investors. When people buy some stock, you have to sell the same and vice versa. You need to observe what others are doing and try to comprehend where they are going wrong.

As per Marks, the market is driven by greed and fear of investors. You should not follow the herd. What others are doing, not necessarily it has to be correct. You can’t afford to get carried away by the actions of the herd. Controlling your emotions is extremely important to achieve success in financial investing.

2. You might face punishing times in your investing career: You can’t expect any industry to perform well every time. It is also not possible for an asset class to provide high returns on all occasions. It might happen that the investing approach of yours fails to generate your target returns on every occasion.

Your portfolio might stay reddened for a substantial period of time. It is pretty okay to incur losses while investing. Losing your corpus in the financial market is a part and parcel of investing.

3. Patience is highly needed to succeed in the financial market: If an asset is underpriced, it doesn’t mean its price is going up tomorrow. Similarly, an overpriced asset doesn’t indicate it will start going bearish soon.

You might come across a plethora of opportunities in the stock market to book quick profits at low risk. But, it is always recommended to stay firm with your investing strategies. Have faith in your investing philosophy to yield returns for you in the long run.

4. Don’t look for “exact bottoms” in the market: Marks said that he looks to buy a stock at a cheap price. He enters into the market when the price is low, not necessarily it has to be the price. It is not always possible that you get to buy all quantities of a share at its rock bottom price.

After an initial investment, when the same stock gets cheaper, Marks again buys more of it. It is not necessary to buy all your shares at the market low to make huge money.

5. Refrain from buying quality stocks at any price: It is not true that you will earn huge profits by investing in high-quality securities. You should look to buy a stock which is trading at a price lower than its intrinsic value.

Investing in stocks at a low purchase price not only generates the scope for future gain, but it also puts a limit on the downside risk. The more is the discount from the fair value (intrinsic value), the greater is the “margin of safety” a stock could provide you with.

6. Psychology is more important than market predictions: You don’t have a crystal ball to predict the future. You can’t forecast how the market will perform tomorrow. You can only mentally prepare yourself from probable situations in the market. For making money in the stock market you require having a deep insight into companies, asset classes, and sectors.

You can’t let your emotions get better of your investment strategies. What matters most is your psychology. You have to be either aggressive or defensive in your approach. It doesn’t matter whether you are investing in stocks or bonds.

It hardly matters whether you pour your money in domestic or international markets. Your returns remain unaffected irrespective of the fact whether you invest in a developed economy or an emerging market. 

Famous quotes by Howard Marks

You can find a plethora of quotes from Marks on the internet. Here are a few quotes which I found worth sharing from his book, The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor’.  

— “The process of intelligently building a portfolio consists of buying the best investments, making room for them by selling lesser ones, and staying clear of the worst.”

— “There are old investors, and there are bold investors, but there are no old bold investors.”

— “There’s a big difference between probability and outcome. Probable things fail to happen—and improbable things happen—all the time. That’s one of the most important things you can know about investment risk.”

Here are two more of my favorite quotes of Howard from his book, ‘Mastering the Market Cycle: Getting the Odds on Your Side’.

— “There are three ingredients for success—aggressiveness, timing, and skill—and if you have enough aggressiveness at the right time, you don’t need that much skill.”

— “What do value investors do? They strive to take advantage of discrepancies between “price” and “value.” In order to do that successfully, they have to (a) quantify an asset’s intrinsic value and how it’s likely to change over time and (b) assess how the current market price compares with the asset’s intrinsic value, past prices for the asset, the prices of other assets, and “theoretically fair” prices for assets in general.”

Also read:

Closing thoughts

Investing requires a person to have patience, dedication, and studying the market thoroughly. In case you want to earn quick profits in the short term, it is possible through trading but not by investing. But, if you are looking to grow your wealth and willing to stay invested for a long time, investing can make it a reality.

Howard Mark has not made huge money in one day. It took him years of experience to reach where he is now. To grow as a fundamental analyst, it is very important to learn from the eminent personalities who have achieved grand success as investors. The investing approach of Marks is immensely informative for any fresher willing to pursue a career in the financial market.

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21 All-Time Best Quotes by Charlie Munger

Charlie Munger, 95, is a name that doesn’t require any introduction for those involved in the investing world. If you are new to investing, you might have heard Charlie as Warren Buffett’s right hand. However, even individually, Charlie Munger is considered as one the world’s wittiest investor.

Anyways, let me first introduce Charlie Munger to the newbies. Charlie Munger is an American investor, businessman and a self-made billionaire with the net worth of over $1.7 Billion (as of Feb 2019). He is the vice chairman of Berkshire Hathaway, the conglomerate headed by Warren Buffett. And like Buffett, Charlie Munger is also an active philanthropist and has donated millions of his personal wealth for good causes.

Interesting, if you look into his background, Charlie Munger never took any course in investing, finance or economics while he was in university. During World War II, Charlie studied meteorology at Caltech to become an army meteorologist. Later, he earned a degree in law from Harvard Law School.

Charlie Munger and Warren Buffett met in 1959 during a dinner party and got along immediately. Although they knew each other for a very long time, however, they built their informal partnership by investing together only in the 1970s. Later in the 1980s, both started the present structure of Berkshire Hathaway and have been running in profitably ever since by building wealth for themselves and their investors. Here’s what Warren Buffett thinks of his business partner Charlie Munger:

We’ve got an extremely good partnership and business is more fun — just as life is more fun — with a good personal partner and to have a great business partner. You know it’s just — we’ve accomplished more but we’ve also had way more fun.” -Warren Buffett

Charlie munger and warren buffett-min

Charlie Munger’s wisdom is an asset for all the investing community. The knowledge and success that he has gained in the past many decades is quite inspirational.  Therefore, in this post, we are going to highlight twenty-one evergreen quotes by Charlie Munger that every investor should know. Let’s get started.

21 All-time best Quotes by Charlie Munger

Charlie Munger Quotes on investing wisdom

“People calculate too much and think too little.”

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

“What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ’em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form. You’ve got to have models in your head. And you’ve got to array your experience — both vicarious and direct — on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and fail in life. You’ve got to hang experience on a latticework of models in your head.”

Charlie Munger Quotes on Wealth Creation

“The big money is not in the buying or the selling, but in the waiting.”

“What are the secrets of success? -one word answer: ”rational”

“It takes the character to sit with all that cash and to do nothing. I didn’t get to where I am by going after mediocre opportunities.”

“To get what you want, you have to deserve what you want. The world is not yet a crazy enough place to reward a whole bunch of undeserving people.”

“All I want to know is where I’m going to die so I’ll never go there.”

Charlie Munger Quotes on Importance of learning

“There isn’t a single formula. You need to know a lot about business and human nature and the numbers… It is unreasonable to expect that there is a magic system that will do it for you.”

I paid no attention to the territorial boundaries of academic disciplines and I just grabbed all the big ideas that I could.”

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero. You’d be amazed at how much Warren reads — and at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”

“Spend each day trying to be a little wiser than you were when you woke up. Day by day, and at the end of the day-if you live long enough-like most people, you will get out of life what you deserve.”

Also read: 31 Hand-Picked Best Quotes on Investing: Buffett, Munger, Graham & More.

Charlie Munger Quotes on Circle of Competence:

“Knowing what you don’t know is more useful than being brilliant.”

“If something is too hard, we move on to something else. What could be simpler than that?” 

I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge.”

“We have three baskets: in, out, and too tough. … We have to have a special insight, or we’ll put it in the “too tough” basket.” 

Charlie Munger Quotes on life rules to live by

“Mimicking the herd invites regression to the mean.”

“Remember that reputation and integrity are your most valuable assets — and can be lost in a heartbeat.”

Just because you like it does not mean that the world will necessarily give it to you.”

“Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand — you must learn to handle mistakes and new facts that change the odds.”

Take a simple idea, and take it seriously.”

Suggested Readings on Charlie Munger

Book: 

Articles: 

The Ultimate Guide to Walter Schloss Investing cover

The Ultimate Guide to Walter Schloss Investing

When you think of investing, the first name that comes to your mind is Warren Buffet- and with good reason. Buffet has a legendary track record and has generated very high returns for his investors since the ’60s. But a lesser-known investor who was just as good and referred to as ‘Big Walt’ by Buffet is Walter Schloss, one of the most legendary investors in the investment world.

Background

Walter Schloss’ investment theories are most applicable to small value investors and were based on the teachings of Benjamin Graham (another icon in the investing world and also known as the father of the value investing).

Schloss’s studies helped gain an insight into how to perform deep value investing that is still relevant in today’s market. While the basis of Walter Schloss’s principles were based on Graham, he developed his own strategies while staying close to the fundamentals. His theories earned him the title ‘Superinvestor’ in 1984.

The Investing Playbook

Walter Schloss’ investment strategies involved a more ‘play by the book’ approach of investing in undervalued stocks. He focused on the quantitative factor and instead of following every stock he owned, Schloss decided to follow stocks based on valuation and buying at a discount to the intrinsic value. In 1994 Schloss listed the factors he believed were required to make money on the stock market. I have discussed the most important factors below:

1. Price is the most important thing when it comes to buying stocks

Walter Schloss’ believed Ben Graham’s philosophy that ‘a stock well bought is half sold’. He felt that every stock will become an attractive buy at a certain point as long as the price dropped low enough to provide a safety margin.

2. The price of a stock in relation to its book value is the most important factor in valuing stocks

Walter Schloss never bought stocks that had a premium to book value ratio. Instead, he bought it at a discount to book value as it provided a margin of safety. The investors who remained patient in the short run would be rewarded in the long run if they systematically bought discounted stocks.

3. Buy stock in companies that have been in business for a while

Schloss preferred to invest in stocks of companies that have a long history of being in business. The fact that these businesses have been in operation for so long gives the investor the confidence that the company will continue to operate long into the future as well. It can also help identify their business cycle and compare the book value earnings. Walter Schloss’s also invested in companies that were going through a downturn in their business cycle if he believed that the asset portfolio was strong and the chances of the company performing well in the long-term seemed favorable.

4. Maintain a diverse asset portfolio and stay fully invested

Walter Schloss usually traded a 100 different stocks at any given time and he was a 100% invested. During a high market valuation, he would adjust his price to book value upward if the company was paying a good dividend. But he relied on dividends rather than earnings as an indicator of a company’s profitability.

When analyzing the quality of the management in the company you choose to invest in, Walter Schloss believed that being ethical was more important than just being smart. In an interview, he said: “In a choice between a smart guy with a bad reputation and a dumb guy, I think I’d go with the dumb guy who’s honest. Of course, you can’t always protect yourself there, either. I guess the choices we’ve made are probably in those areas.”

The ‘rules of investing’ were written by Walter Schloss many years ago but they still remain relevant today. If an investor learns to stick to a small value approach, it will benefit them in the long run. Keep it simple.

Also read: Why Warren Buffet Suggests- ‘Price Is What You Pay, Value Is What You Get’?

Walter Schloss and Portfolio Management

Walter Schloss did not invest too much time assessing the details of a particular stock to the very last detail rather he studied the company financials and did not overanalyze each investment opportunity. He spread his risks evenly and sometimes invested just $10,000 in a stock. His portfolio consisted of a hundred stocks.

In the initial investment, Schloss would take a small position and eventually buy more if the difference between the trading price and intrinsic value continued to widen. In particular, he preferred to invest in companies with a higher margin of safety and focused on stocks with low leverage.

Walter Schloss’s deep value investing

As a small value investor, the strategies used by Walter Schloss are extremely relevant. Walter Schloss’s investment strategy was incredibly old-school, he was a simple man and operated more like a small-time investor rather than a professional financial advisor. Schloss never aimed to reach new heights as an investor and continued to use and search for new deep value investing ideas till the very end.

Value investing are stocks that trade lower than their book value and while it is hard to find these stocks in today’s market where ‘money never sleeps’, this old school strategy developed by Walter Schloss is still important. Here are the key takeaways of this investing style:

  • The main criteria of the investor should be to discount your stock to a tangible book value
  • The quality of the management is also important, if the company is not confident in their management, then neither should you
  • Having a diversified portfolio is incredibly important. In the long term, it is the valuation of your portfolio that helps you earn large gains in the stock market.

Also read: #5 Things Warren Buffett looks for before investing.

BONUS: 16 Investing Rules from Walter Schloss

(FROM A 1994 LECTURE)

  1. Price is the most important factor to use in relation to value.
  2. Try to establish the value of the company. Remember that a share of stock represents a part of a business and is not just a piece of paper.
  3. Use book value as a starting point to try and establish the value of the enterprise. Be sure that debt does not equal 100% of the equity. (Capital and surplus for the common stock).
  4. Have patience. Stocks don’t go up immediately.
  5. Don’t buy on tips or for a quick move. Let the professionals do that if they can. Don’t sell on bad news.
  6. Don’t be afraid to be a loner but be sure that you are correct in your judgment. You can’t be 100% certain but try to look for the weaknesses in your thinking. Buy on a scale down and sell on a scale up.
  7. Have the courage of your convictions once you have made a decision.
  8. Have a philosophy of investment and try to follow it. The above is a way that I’ve found successful.
  9. Don’t be in too much of a hurry to see. If the stock reaches a price that you think is a fair one, then you can sell but often because a stock goes up say 50%, people say sell it and button up your profit. Before selling try to re-evaluate the company again and see where the stock sells in relation to its book value. Be aware of the level of the stock market. Are yields low and P-E ratios high? If the stock market historically high. Are people very optimistic etc?
  10. When buying a stock, I find it helpful to buy near the low of the past few years. A stock may go as high as 125 and then decline to 60 and you think it attractive. 3 years before the stock sold at 20 which shows that there is some vulnerability in it.
  11. Try to buy assets at a discount than to buy earnings. Earning can change dramatically in a short time. Usually, assets change slowly. One has to know much more about a company if one buys earnings.
  12. Listen to suggestions from people you respect. This doesn’t mean you have to accept them. Remember it’s your money and generally, it is harder to keep money than to make it. Once you lose a lot of money, it is hard to make it back.
  13. Try not to let your emotions affect your judgment. Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks.
  14. Remember the work compounding. For example, if you can make 12% a year and reinvest the money back, you will double your money in 6 yrs, taxes excluded. Remember the rule of 72. Your rate of return into 72 will tell you the number of years to double your money.
  15. Prefer stock over bonds. Bonds will limit your gains and inflation will reduce your purchasing power.
  16. Be careful of leverage. It can go against you.

Conclusion

The Walter Schloss investing style is great for anyone looking to invest in small companies. The strategies help reduce risk with the promise of high returns.

Unlike Warren Buffet’s investing style which requires the ability to identify a competitive advantage and do thorough research into a company’s financial statements that most people don’t have the know-how to do. Schloss provides a great alternative to this- focus on assets rather than earnings.

Many small investors are in the habit of solely investing in a company based on its annual earnings but they are more likely to succeed if they focus on the assets in the balance sheet. Walter Schloss investing is a time-tested lesson that still holds true today.

becoming warren buffett

Becoming Warren Buffett – 2017 HBO Documentary [Video]

Becoming Warren Buffett – 2017 HBO Documentary [Video]

Warren Buffett, also known as the ‘Oracle of Omaha’ is a popular name in the investing world.

He is an American business magnate, investor, speaker and philanthropist who serves as the chairman and CEO of Berkshire Hathaway. Warren Buffett is considered the greatest investor of all time. As of June 2018, he is the third richest person on the world with a net worth of over $88.5 billion

Warren Buffett was born on 30th August 1920, in Omaha, Nebraska. He made his first stock investment as an age of eleven. Later, he attended Columbia Business School as a graduate where he learned the philosophies of Value Investing through his mentor- Benjamin Graham, the father of value investing. In 1959, Warren Buffett created his Buffett Partnership after meeting Charlie Munger.

In 1962, Warren Buffett started buying stocks in a textile manufacturing firm called Berkshire Hathaway On May 10, 1965 Warren Buffett, through his investment partnership, took over the management and control of Berkshire Hathaway. Buffett’s partnership firm had accumulated about 49% of the shares of Berkshire.

As of today, Berkshire Hathaway is the third largest public company in the world, the ninth largest conglomerate by revenue and the largest financial services company by revenue in the world.

Becoming Warren Buffett – 2017 HBO Documentary

In 2017, HBO released a documentary on Becoming Warren Buffett, a co-production of HBO and Kunhardt Films; directed by Peter Kunhardt; produced by Teddy Kunhardt and George Kunhardt.

Here’s the video on how Warren Buffett became the greatest investor in the world –>

(Credits: Advexon TV)

Also read:

best quotes on investing

31 Hand-Picked Best Quotes on Investing: Buffett, Munger, Graham & More.

31 Hand-Picked Best Quotes on Investing: Buffett, Munger, Graham & More:

Over the years, there are many successful investors who have shared their wits with the world. Warren Buffett, Benjamin Graham, Philip Fisher, Charlie Munger, Peter Lynch, Seth Klarman, Joel Greenblatt etc are few of the famous investors who have inspired the world by their ‘words of wisdom’.

Here are the 31 hand-picked best quotes on Investing by few of the world’s most successful investors. Enjoy Yourself.

31 Hand-Picked Best Quotes on Investing:

Warren Buffett

warren buffett

  1. “Price is what you pay. Value is what you get.”
  2. “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1”
  3. “Risk comes from not knowing what you are doing.”
  4. “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
  5. “In the business world, the rearview mirror is always clearer than the windshield.”
  6. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
  7. “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
  8. “The difference between successful people and really successful people is that really successful people say no to almost everything.”
  9. “The stock market is a device for transferring money from the impatient to the patient.”
  10. “Diversification is protection against ignorance. It makes little sense if you know what you are doing.”
  11. “I will tell you how to become rich. Close the doors, be fearful when others are greedy. Be greedy when others are fearful.”

Also read: Why Warren Buffet Suggests- ‘Price Is What You Pay, Value Is What You Get’?

PHILIP FISHER

philip fisher

  1. “Conservative investor sleep well.”
  2. “The stock market is filled with individuals who know the price of everything, but the value of nothing.”

Also read: Common Stocks and Uncommon Profits by Philip Fisher- Book Review

Benjamin Graham

  1. “Buy not on optimism, but on arithmetic.”
  2. “The individual investor should act consistently as an investor and not as a speculator.”
  3. “If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.”
  4. The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.”

Also read: ‘The Intelligent Investor’ by Benjamin Graham- Book Review

Charlie Munger

  1. “Spend each day trying to be a little wiser than you were when you woke up.” – Charlie Munger
  2. “Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.”
  3. “No wise pilot, no matter how great his talent and experience, fails to use his checklist.” – Charlie Munger Peter

Also read: 21 All-Time Best Quotes by Charlie Munger

Peter Lynch

peter lynch

  1. “Behind every stock is a company. Find out what it’s doing.”
  2. “Although it’s easy to forget sometimes, a share is not a lottery ticket… it’s part ownership of a business.”
  3. “If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.”
  4. “Go for a business that any idiot can run – because sooner or later, any idiot probably is going to run it.”
  5. “If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.”

Also read: One up on wall street by Peter Lynch- Book Review

Few Other Best Quotes on Investing:

  1. “Minimizing downside risk while maximizing the upside is a powerful concept.” – Mohnish Pabrai
  2. “The secret to investing is to figure out the value of something – and then pay a lot less.” Joel Greenblatt
  3. “Every once in a while, the market does something so stupid it takes your breath away.” – Jim Cramer
  4. “While it might seem that anyone can be a value investor, the essential characteristics of this type of investor-patience, discipline, and risk aversion-may well be genetically determined.” -Seth Klarman
  5. “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson
  6. “The four most dangerous words in investing are: ‘this time it’s different.'” – Sir John Templeton

Also read: The Little Book That Beats The Market by Joel Greenblatt- Book Review

BOTTOM LINE:

None of the quote mentioned above by any of the successful investors is too complex to understand. Stock investing is simple if you have the right attitude and follow the proper approach.

That’s all. I hope this post- “31 Hand-Picked Best Quotes on Investing -Buffett, Munger, Graham & More” is useful and entertaining to you.

If I missed any of the best quotes on investing, feel free to comment below. #HappyInvesting