Latest memo from Howard Marks: Something of Value

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Quote:If asked about possible silver linings to this pandemic, I would list first the chance to spend more time with family. Our son Andrew and his wife and son moved in with Nancy and me in Los Angeles at the beginning of the pandemic, as they were renovating their house when Covid-19 hit, and we lived together for the next ten weeks. There’s nothing like getting to spend months at a time building relationships with grandchildren, something we were privileged to do in 2020. I’m sure the impact will literally last lifetimes.

As I’ve previously reported, Andrew is a professional investor who focuses on making long-term investments in what the world calls “growth companies,” and especially technology companies. He’s had a great 2020, and it’s hard to argue with success. Our living together led me to talk with him and think a great deal about subjects on which I hadn’t previously spent much time, contributing a lot to what I’ll cover in this memo.

I’ve written before about how the questions I’m asked give me a good sense for what’s really on people’s minds. These days, one I frequently field is about the outlook for “value” investing. “Growth” stocks have meaningfully outperformed “value” for the last 13 years – so long that people are asking me whether it’s going to be a permanent condition. My extensive discussions with Andrew led me to conclude that the focus on value versus growth doesn’t serve investors well in the fast-changing world in which we live. I’ll start by describing value investing and how investors might think about value in 2021.

A refreshing change of pace.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger

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