Wednesday, 20 April 2011 00:00

Howard Marks Book Review

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The Most Important Thing: Uncommon Sense for the Thoughtful Investor, by Howard Marks, Publication Date: May 1, 2011

Columbia Business School Publishing

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The Most Important Thing

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The Most Important Thing

I first discovered Mr. Marks several years ago when an investment analyst published a reading list that highly recommended a book that I hadn't heard of: Memos to Oaktree Clients by Howard Marks. I didn't place the name but a quick search on the internet revealed that Mr. Marks has had a long, and distinguished, investing career and was one of the founders of Oaktree Capital Management, a firm that invests in distressed assets and now manages approximately $80 billion. I recognized all of the other books that the analyst mentioned and thought they were all top tier quality books so I decided to obtain a copy of Mr. Mark's book immediately.

As the title indicates it was a selection of memos about his general investing philosophies that Mr. Marks had written to his clients over the years. It wasn't long after I opened the book before the rest of the world faded to black as I read, totally captivated. Mr. Marks has a clear writing style that reminds me a great deal of Mr. Buffett's writing. The ideas are powerful but they came across so clearly that you will have no difficulties grasping the concepts he is discussing just as Mr. Buffett has the knack of distilling complicated matters into easily discernable bits.

So, as you can imagine, when I discovered that he was publishing another book I was terribly excited and applied right away to obtain a review copy. Having had it in my possession for a few days now , and as promised in an earlier blog post, here is my review of the book.

I must say before I start the actual review that Mr. Marks and I have reached many of the same conclusions about investing so I may be a bit colored in my judgment. It is certainly hard not to praise his core investing beliefs when then coincide so closely with my own.

Okay, enough of the preliminaries. Mr. Marks states that when he was attending client meetings over the years he noticed a pattern. He would say in one meeting that that such and such was the most important thing about investing and in later meetings he found himself referencing other items that he titled the most important thing to understand. Upon reflection about this pattern he decided to write a memo in July of 2003 that covered all these critical areas in his investing philosophy.

This new book expands upon the ideas he covered in that original memo. Topics that are covered include: market efficiency, value, risk, investment cycles, contrarianism, finding bargains, patient opportunism, circle of competence, luck, avoiding pitfalls, etc... In short all the topics that a focus investor needs to understand and be able to place, and use, in their own mental models.

What does Mr. Marks want his readers to gain from his book? Here are his own words from the introduction of the book:

"I didn't set out to write a manual for investing. Rather, this book is a statement of my own investment philosophy. I consider it my creed, and in the course of my investment career it has served like a religion. These are the things I believe in, the guideposts that keep me on track. The messages I deliver are the ones I consider the most lasting. I'm confident their relevance will extend beyond today.

You won't find a how-to book here. There's no surefire recipe for investment success. No step-by-step instructions. No valuation formulas containing mathematical constants or fixed ratios - in fact, very few numbers. Just a way to think that might help you make good decisions and, perhaps more important, avoid the pitfalls that ensnare so many.

It's not my goal to simplify investing. In fact, the thing I most want to make clear is just how complex it is. Those who try to simplify investing do their audience a great disservice. I'm going to stick to general thoughts on return, risk and process..."

Mr. Marks has succeeded in his goals in a brilliant manner. There is, quite simply, an incredible amount of wisdom between the covers of his book and an investor is doing them a disservice if they don't read, and re-read, this book. I will be placing it on my shelf right next to the great investments classics of Security Analysis, The Intelligent Investor, the Berkshire Hathaway annual reports, and Margin of Safety. Quite simply I can't recommend it highly enough.

Additional praise for the book:

"The Most Important Thing, Mark's insightful investment philosophy and time-tested approach, is a must read for every investor." Seth Klarman, President, The Baupost Group

"When I see memos from Howard Marks in my mail1318, they're the first thing I open and read. I always learn something, and that goes double for his book." Warren Buffett

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