Howard Marks: Value matters more than quality

In this interview, Howard Marks shares his investment philosophy and lessons learned over his 55-year career.

Here are the key takeaways

Contrarian investing is essential for exceptional success: “It’s hard to achieve singular success by joining the herd. The only way to be uniquely successful is to do things that nobody else is doing and have them turn out well.” Marks emphasizes that investing in unpopular assets can lead to superior returns, but notes that being contrarian alone isn’t enough – you must also be right.

Value matters more than quality: “It’s not what you buy, it’s what you pay that counts.” Marks learned this lesson early in his career when investing in the “Nifty Fifty” blue-chip stocks that lost 95% of their value despite being considered the best companies in America.

Market cycles are inevitable: Marks believes cycles will always exist because they arise from human psychology – excessive optimism followed by excessive pessimism. “In the real world things fluctuate between pretty good and not so hot, but in investors’ minds things fluctuate between flawless and hopeless.”

Intellectual humility is crucial: Marks warns against certainty in investing, saying there’s no place for words like “never,” “always,” “forever,” “can’t,” “won’t,” “will,” and “has to” in investment committees. He advocates for intellectual humility, which he defines simply as “the other person could be right.”

Luck plays a significant role: Marks acknowledges being “the luckiest person alive” and believes success comes when preparation meets opportunity. His career benefited from being in the right place at the right time, particularly when he was moved to the bond department at Citibank, which led to his work in high-yield bonds.