In one of his famous “memos” released on July 26, Howard Marks (Trades, Portfolio), co-chairman of multibillion-dollar asset management firm Oaktree Capital Management, discussed the concept of finding investment success by being different.
The paper, titled “I Beg to Differ,” began with Marks reminiscing on an early part of his career where he was moved to working in a bank’s bond department. He wrote:
“Now I was investing in securities most fiduciaries considered ‘uninvestable’ and which practically no one knew about, cared about, or deemed desirable ...and I was making money steadily and safely. I quickly recognized that my strong performance resulted in large part from precisely that fact: I was investing in securities that practically no one knew about, cared about, or deemed desirable. This brought home the key money-making lesson of the Efficient Market Hypothesis, which I had been introduced to at the University of Chicago Business School: If you seek superior investment results, you have to invest in things that others haven’t flocked to and caused to be fully valued. In other words, you have to do something different.”
The investor then went on to examine what he calls “the essential difference,” as well as second-level thinking, contrarianism and making the decision to risk being wrong.
Read Marks’ full memo here.
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