Last week, I focused on one titled “bubble.com” and tried to draw parallels between the tech bubble and today’s stock market, which seems obsessed with AI.
This week, I return to two memos I selected among Howard Marks’ writings. Both discuss the investment philosophy of Oaktree Capital, the firm he founded, and use numerous sports analogies.
In the memo “How the Game Should Be Played,” written in May 1995, Marks explains why he decided to found Oaktree Financial. Essentially, he wanted to manage money according to his own investment philosophy. For him and his partners, that philosophy rests above all on capital preservation. Thus, he writes: “While we strive to be somewhat above average each year, our philosophy mandates that we put the greatest emphasis on trying to avoid losing our clients’ money.”
Marks uses the analogy of golfer Tom Kite, who, at age 42, had earned total winnings of $7.2 million over a twenty-year career without ever winning a major tournament (before 1992). He relates this example to his way of investing: “That’s the way we think it should be done: by consistently finishing in the money, but with no need for headline-grabbing victories. What we think matters isn’t whether you hit home runs or win Masters on any given day, but rather what your long-term batting average is.”
In the second memo, “What’s Your Game Plan,” written in September 2003, Marks uses several sports analogies—from tennis to baseball to football—to explain his investment approach. Reading this, I realize I’m not the only one who uses sports (in my case, mostly tennis) to talk about investing!
The first quote refers to baseball and seems especially relevant after the Blue Jays’ recent playoff loss: “The key to investment success isn’t hitting home runs; it’s avoiding strikeouts and inning-ending double plays.” This way of thinking perfectly represents how we invest at COTE 100.
He also believes that this is why the careers of many portfolio managers don’t last as long as they should: “I don’t think many investment managers’ careers end because they fail to hit home runs. Rather, they end up out of the game because they strike out too often - not because they don’t have enough winners, but because they have too many losers.” For Marks, avoiding losing investments must come first.
I particularly appreciate Marks’s analogy with tennis: “In amateur tennis, points aren’t won; they’re lost.” It’s a concept I’ve taken up in my book and one I strongly believe in—both for tennis and for investing: success in both comes from minimizing mistakes rather than trying to make spectacular shots.
Marks also draws an analogy with European football, or soccer. In this sport, unlike American football, the same players must play both defense and offense. The coach can choose to have his players focus on offense, defense, or a balance of both. For him, “Oaktree’s preference for defense is clear.”
He adds: “Oaktree’s portfolios are set up to outperform in bad times, and that’s when we think outperformance is essential.”
I appreciate these memos from Marks not only because I greatly enjoy sports analogies, but also because his investment philosophy closely resembles mine—and that of COTE 100.
Philippe Le Blanc, CFA, MBA
Chief Investment Officer at COTE 100
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This article is also published on 
(in French)
