Howard Marks on His Current Favorite Idea & Investment Strategy ~ market folly

Friday, July 20, 2012

Howard Marks on His Current Favorite Idea & Investment Strategy

We've long posted commentary from Oaktree Capital's Howard Marks (see his recent letter here) due to the amount of wisdom he often shares.  Warren Buffett has even said Marks' letters are the first thing he reads when they come in.  So today we wanted to highlight a longer conversation with Marks on Bloomberg recently.

His Current Favorite Idea: "We think the current combination of good opportunities and good quantity of dealflow is in real estate and real estate related debt"  (both in the US and abroad, but but the US looks a bit better currently).

He thinks there's more of an aversion to real estate today than other areas.  Marks has bet on single family rental properties, believing that there will be a comeback in housing.  The key is to have patient capital, he says.  Numerous other prominent investors also liked this idea at this week's Delivering Alpha conference real estate panel.

On Investment Strategy:  "In order to get above average results, you have to think different and better.  It doesn't always work to do the opposite of what the herd is doing.  You have to know what they're doing, know why they're doing it, know what's wrong with it, and then do the opposite."

He says that everyone is looking at the macro and it's very hard to make calls like that.  He points to great investors like Warren Buffett not making macro calls and instead focusing on specific company fundamentals.

On Opportunities:  He says opportunities usually exist because the sellers are making a mistake (because they're forced to sell, or panicking or they get a margin call).  He penned his entire last memo on mistakes.

On Europe:  "It's a complex area, very murky, very uncertain."

Embedded below is the video of Marks' appearance on Bloomberg:

For more from the Oaktree manager, we've posted an excerpt from his book on contrarianism.

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