While Howard Marks and Warren Buffett share a deep respect for intrinsic value and long-term investing, their approaches diverge in several key areas. These differences, while subtle, offer valuable insights into the diverse strategies that can lead to success in the financial markets.

Risk Management

Marks is known for his emphasis on risk management and avoiding losses. He believes that “if we avoid the losers, the winners will take care of themselves.” This focus on capital preservation is evident in Oaktree’s investment strategies, which often involve buying distressed debt or other undervalued assets with a margin of safety. Buffett, while also risk-averse, is more focused on the long-term growth potential of his investments. He is willing to take on more concentrated positions in companies he believes have a durable competitive advantage, even if it means accepting more short-term volatility.

Investment Philosophy

Marks is a proponent of value investing, but he also emphasizes the importance of understanding market cycles and investor psychology. He believes that these factors can create opportunities for outsized returns, but they can also lead to significant losses if not properly understood. Buffett, on the other hand, is a more traditional value investor who focuses on buying high-quality businesses at reasonable prices. He is less concerned with market cycles and investor psychology, believing that the long-term performance of a business is the most important factor in determining its value.

Investment Universe

Marks, through Oaktree Capital Management, has a broader investment mandate than Buffett. Oaktree invests in a variety of asset classes, including distressed debt, real estate, and private equity. This allows Marks to take advantage of opportunities in different markets and to diversify his portfolio. Buffett, on the other hand, primarily invests in publicly traded stocks of large, well-established companies. He has a more concentrated portfolio than Marks, and he is less likely to invest in alternative asset classes.

Communication Style

Marks is known for his clear and concise communication style. He regularly publishes memos to his clients that share his insights on the market and his investment philosophy. These memos are widely read and respected in the investment community. Buffett also communicates regularly with his shareholders through his annual letters, but his writing style is more folksy and anecdotal. He often uses stories and analogies to explain his investment philosophy, and he is less likely to share specific investment ideas.

The divergent paths of Howard Marks and Warren Buffett highlight the diverse approaches that can lead to success in investing. While their shared principles provide a solid foundation, their differences in focusing on macroeconomic factors, investment universe, portfolio concentration, investment style, and communication offer valuable lessons for investors seeking to develop their own unique strategies. By understanding these nuances, investors can tailor their approach to their individual risk tolerance, investment goals, and areas of expertise, ultimately increasing their chances of achieving long-term success in the market.

If you want to know where Marks and Buffett converge on investment philosophy read this.