In this interview with INSEAD students at the Investment Management Club, Howard Marks explains why investing success doesn’t consist of buying good things but buying things well. Here’s an excerpt from the interview:
Marks: Now I’m investing in the worst public companies in America, and I’m making money steadily and safely.
So this was really formative for me. What does it teach you?
It’s not what you buy, it’s what you pay.
That investing success doesn’t consist of buying good things but buying things well.
And I don’t know how many people their, English is their first language, but you better understand the difference or you’re in big trouble.
What I came to understand is that what matters most, well not most, but what matters is that if you buy something… that things have an intrinsic value, and by the way when everybody was dealing with the Nifty 50 nobody was thinking about intrinsic value.
In particular because they couldn’t estimate the earnings 20 years out. Which is of course difficult, but if you buy things for less than their intrinsic value you’re probably on your way to a good outcome.
If you pay more than intrinsic value you’re going to have to work very hard and get lucky to make a decent return. So this was really important.
You can watch the entire discussion here:
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