Howard Marks is a legendary investor, known for his ability to identify market trends and make astute investment decisions.

As the co-founder and co-chairman of Oaktree Capital Management, he has built a reputation as one of the most respected minds in the world of finance. This article explores the principles and strategies that have led to his success, his most famous deals, and some little-known trivia about the man himself.

Investment Philosophy

Marks’ investment philosophy is centred around the concept of risk management. He believes that the most important factor in successful investing is not necessarily achieving high returns, but rather avoiding losses. In his book, The Most Important Thing, he outlines his approach to investing, which he calls “second-level thinking.” This involves considering not only the immediate effects of an investment decision but also the potential consequences further down the line. He advises investors to “look at things differently from everyone else,” and to be sceptical of popular trends and consensus opinions.

One of Marks’ key strategies is to focus on the psychology of the market. He believes that markets are inherently irrational and that investors often overreact to news and events, causing prices to fluctuate wildly. As a result, he looks for opportunities to buy assets that are undervalued and to sell those that are overvalued. He argues that successful investing requires a contrarian mindset and that it is important to be patient and disciplined in order to avoid making impulsive decisions.

Famous Deals

Marks is best known for his investments in distressed debt. In the aftermath of the financial crisis of 2008, Oaktree Capital Management was able to capitalize on the turmoil in the markets by buying up distressed assets at discounted prices. One of the most famous of these deals was the acquisition of debt from the bankrupt casino company, Caesars Entertainment. Oaktree and a group of other investors purchased $6 billion in bonds from the company at a steep discount and later negotiated a settlement that gave them ownership of several of the company’s properties.

Another notable investment was in the energy sector. In 2016, Oaktree teamed up with Riverstone Holdings to acquire a 50% stake in the pipeline company, Rover Pipeline, for $1.3 billion. The deal was seen as a bet on the future of natural gas, as the pipeline was designed to transport gas from the Marcellus and Utica shale formations in Pennsylvania and Ohio to markets in the Midwest and Canada.

Famous Quotes

Marks is known for his ability to distil complex financial concepts into pithy aphorisms. Here are some of his most famous quotes:

“First-level thinking is simplistic and superficial, and just about everyone can do it (a bad sign for anything involving an attempt at superiority). All the first-level thinker needs is an opinion about the future, as in ‘The outlook for the company is favourable, meaning the stock will go up.'”

“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.”

“When it comes to investing, we never know what’s going to happen next. But we do know that what has happened in the past provides a good indication of what’s likely to happen in the future.”

Little-Known Trivia

Despite his success in the world of finance, Marks actually started out as a philosophy major at the University of Pennsylvania. He later went on to study business at the Booth School of Business at the University of Chicago.

Marks is also a prolific writer and has published several books on investing, including The Most Important Thing, Mastering the Market Cycle, and When It’s Time to Buy.

Conclusion

Howard Marks is a rare breed of investor, combining a contrarian mindset with a deep understanding of market psychology. His emphasis on risk management and his ability to identify undervalued assets has led to his success in the world of finance. Marks’s investment strategies, principles, and famous deals demonstrate his mastery in identifying opportunities and managing risks, and his famous quotes provide insightful lessons for investors. Through his writing and career, Marks has become a trusted authority on investing, inspiring countless individuals to adopt his philosophy and strategies. For professionals looking to learn from one of the greatest investment minds of our time, studying the works and career of Howard Marks is certainly a great place to start.