Chairman and cofounder of Oaktree Capital, Howard Marks, reveals his investment philosophy.

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The Warren Buffet Way

KEY TAKEAWAYS:

• Investment success doesn’t come from “buying good things,” but rather from “buying things well.” Thus, it’s not what you buy; it’s what you pay for it.

• “To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit.” -Sir John Templeton

• To achieve superior investment results, you have to hold non-consensus views regarding value, and they have to be accurate. That’s not easy.

• Being too far agreed of your time is indistinguishable from being wrong.

• One of the great sayings about poker is that “in every game there’s a fish. If you’ve played for 45 minutes and haven’t figured out who the fish is, then it’s you.” The same is certainly true of inefficient market investing.

• One day a gambler who lost regularly heard about a race with only one horse in it, so he bet the rent money. Halfway around the track, the horse jumped over the fence and ran away. Invariably things can get worse than people expect.

• “Its only when the tide goes out that you find who’s been swimming naked. The tide cannot come in forever.” -Warren Buffet

• When everyone believes something is risky, their unwillingness to buy usually reduces its price to the point where it’s not risky at all. When everyone believes something embodies no risk, they usually bid it up to the point where it’s enormously risky.

• “We have two classes of forecasters: Those who don’t know—and those who don’t know they don’t know.” -John Kenneth Galbraith

• “It ain’t what you don’t know that gets you in trouble. It’s what you know for sure that just ain’t so.” -Mark Twain

• Those who cannot remember the past are condemned to repeat it.

• Most trends—both bullish and bearish—eventually become overdone, profiting those who recognize them early but penalizing the last to join. Thats the reasoning behind the investment adage: “What the wise man does in the beginning, the fool does in the end.”

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