Recently while listening to Oaktree Capital’s Co-Founder Howard Mark’s it was clear I needed to pull up my notes and write down for you these 6 Investing Principles which give Oaktree’s Team an Investing Edge in the Market.
Like most value investor’s we all know the steps of using Benjamin Grahams strategy from the Book Intelligent Investor when valuing a Stock of Investment that is trading at a steep discount. Well like Graham, Mr. Howard Marks puts his own personal twist and strategy to work while adhering to a few universal Basics Graham has taught us all as Value Investors. It is said when Mr. Marks writes an Annual Letter or his famous yearly Memo and releases it? Warren Buffett himself stops what he is doing and reads it.
During an interview recently Mr. Marks shared; ” I wrote my yearly memo for nearly 12 years and knew that not many people would read it. But one day after the 15th year or so? It basically became an overnight success.” That gives me hope that maybe one day my little Investment Blog will also be as interesting as Mr. Howard Marks annual Memo’s. Just maybe.
These Principles Guide Our Investment Process
- Risk Control. Managing Risk should be a Investment Managements Greatest Investment Objective. Without managing risk through extensive Due Diligence and heavy research and planning? Our Investment thesis maybe unproven.
- Consistency. When thinking about making Bad Investments to Knocking one out of the Park like a Baseball Player, an Investor must be consistent with the performance of their investments. On a scale of 1-10? It’s great to be hitting Home Runs with Investments that always win. But when things go bad and they often due with unforseen Risk with Investments? It’s better to be averaging a success rate range in the upper middle of 3-6max. And not allow the bad beats of Bad Investments to bring down your Median Average of Consistency. Very Important.
- Be Selective and Look inside the less efficient markets for opportunities. Most markets are highly efficient. But there are places within markets where efficiency is lacking. Those are the spaces where you will be able to apply the Value Investor Graham basics and WIN! Finding Investments that are Cheap and look over leveraged? Maybe just exactly what you have been looking for to apply the skills we have learned over the years. Emerging Markets where information is not as transparent and is also not as available? Marks say’s this is where you will find Deals.
- Focus on a High Degree of Specialization. Mr. Marks say’s “Our people at Oaktree do a few things well. We are not Generalists.”
- Investment Decisions are not driven by Macro Forecasts. Don’t allow the wind blowing over the markets to catch your sails and take you off course to far away lands. We are Fundamental Analysts. We use Bottom Up Strategy.
- We are not Market Timers. Mr. Marks emphasizes “If it’s cheap today? We buy it! We don’t need to wait six months and see if it will be cheaper. That makes no since.” I tend to agree with Mr. Marks. When your looking for investments? Your Thesis is proven correct or it’s not. Apply the Rules and Skills we have been taught.
Did you catch my last Article on Commercial Real Estate HERE.
Additional Notes from Mr. Marks that are very relevant to Investment Management and Investing for Success.
“You Can’t Predict. But you can prepare.” “Have a Large number of Good Investments is our Mantra.” “Find Good Companies with correctable Bad Balance Sheets” “Distressed Debt holds opportunities” “Find Good Companies that have fallen on Hard Times.” “Look for Companies with Good Managment with Too Much Debt.” “How do we fix this?” “Our Credit committee during the Bankruptcy process can fix and raise the value. We get profit from our efforts.” “We reject Onerous Debts” “We are not turnaround artists.” “All we focus on is Senior Secured Debt obligations.”
In the End? Our team Avoids Losers and Bad Companies!
In Conclusion
In conclusion to this week’s post on Investing Philosophy, If you do adhere and adopt the unique and proven principles in this post for your own purposes? It’s very likely you will be happy with the results that follow. I do hope you learned something from Mr. Howard Marks Investing Principles. And do feel free to share todays article. With that I personally Thank you for stopping by and reading. And I hope you will come back and visit my Investment Blog soon.
Godspeed.
JS
