Howard Marks: How Value Investors Can Gain An Edge

In his latest interview with The Ivey Business School, Oaktree’s Howard Marks recalls the story of the time he was speaking with a famous value investor who did well in 1999, when value investors were getting crushed, and the lesson he took away from that meeting. Here’s an excerpt from the interview:

Marks: I think open-mindedness is a great thing. As you will remember seeing in the memo I ran into… there was one great value investor, famous value investor. I don’t like to use names, who did very well in the tech bubble of… especially in ’99. And ’99 was a horrible year for value people. I think it was the worst year in history for… well maybe before last year. But I think that value… growth beat value by 2500 basis points in ’99 as I recall.

So I ran into this famous value investor who had a great year, and I said, how did you do it?

Well I was lucky. I had Amazon and I had this and whatever else, he was talking about maybe Apple, and I said well how can you own those as a value investor?

He says, they look like value to me!

So I think it’s a question of just opening up your mind as to what can constitute value. It doesn’t have to be in the present. It doesn’t have to be absolutely predictable and quantifiable, and it makes it harder when you venture away from the quantitative, and away from today, but I think you have to to get that edge

You can watch the entire interview here: