Not many folks will be familiar with Mr Marks. but here is what Warren Buffett say about him:
"When I see memos from Howard Marks in my mail, they’re the first thing I open and read. I always learn something, and that goes double for his book."
In his book, The Most Important Thing (next in my reading list after The Outsiders) he makes this reference how to evaluate what to buy in a distress situation:
"I need 8 percent. I’d be glad to earn 10 percent instead. Twelve percent would be even better. But I won’t try for more than that, because doing so would entail risks I’m just not willing to bear. I don’t need 20 percent."
Can readers tell me what does he mean by this?
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Koh Kai Xiang
Tuesday 26th of March 2013
seems like he meant that sometimes things are just too good to be true. and most investors should stay alert and away from such seemingly too good to be true opportunities when they arise. Just a cautionary tale i guess.
btw i think he didn't discuss this restrictively in the context of distressed situation. He mentioned this line in the "reasonable expectation" chapter and he seems to imply that investors in general should strive to set reasonable expectation, adopt an attitude of skepticism when such seemingly too good to be true opp arise. This also supports his idea of "second level thinking" (why would the other side of the party gave me such wonderful opp of 20% return? is there sth that he knows but i missed out? etc)
Kyith
Tuesday 26th of March 2013
Hi kai xiang,
Thanks for sharing your insights. I think the approach and yardsticks is a bit different.
I agree that buffet has moved from the traditional value investing.
My approach and mindset leans closer to marks being conservative and looking for a safe required rate of return for a risk I am comfortable with
Lee Wen Loong
Monday 25th of March 2013
Is it not weird that Warren Buffett mentioned "I always learn something and that goes double for his book" when the phrase you quoted is not in accordance to Warren Buffett style of investment. Warren Buffett, if i am not mistaken, mentioned he only looks into investment that can earn him at least 15% whereas the phrase indicates Howard is only willingly to take maximum earnings of 12% from his investment.
Koh Kai Xiang
Tuesday 26th of March 2013
buffett has transitioned into a different type of investor that he used to be. (unlike his tutor graham) He used to look for reasonably good businesses at a bargain price, he now turns to fantastic business at reasonable price (after he knew munger). It is pretty obvious that Marks (a distressed situation specialist) and Buffett (brand name, high fcf businesses preferred) practise different investment styles, but ultimately it all goes into buying undervalued businesses. Thus i guess that's why Buffett says he has much to learn from Marks' memo.
Kyith
Monday 25th of March 2013
I think what Mr marks is looking for is really meaning sooner other stuff. He is citing an example of how to evaluate a particular investment compare to another.