Random Thoughts on the Identification of Investment Opportunities
This is a very succinct memo from Marks. He makes 7 very simple points, some of which do overlap. Lets look at what Marks has to say in this memo.
#1 – No group or sector in the investment world enjoys as its birthright the promise of consistent high returns
He mentions people affinity for real estate. In India, I believe the other pet investment class is gold. The key point here is timing. If invested at the wrong time either of these investments would not work.
#2 – What matters most is not what you invest in , but when and what price
Again the reiteration is on right time and right price.
#3 – The discipline which is most important in investing is not accounting or economics, but psychology
Marks mentions that investing in akin to a popularity contest. If you buy at the peak of the popularity wave, then it will definitely be a dangerous venture.
#4 – The bottom line is that it is best to act as a contrarian
#5 – Book the bet that no one else will
#6 – As Warren Buffett said , “the less care with which others conduct their affairs, the more care with which you should conduct yours” When others are afraid, you needn’t be; when others are unafraid, you’d better be.
#7 – Gresham’s law says “bad money drives out good”. When paper money appeared, gold disappeared. It works in investing too – bad investors drive out good.
In my view the entire message of this memo was to suggest being a contrarian and being ready to go against the herd.
You can read the entire memo here