- Howard Marks has only made five market calls in 50 years, he noted in a memo this week.
- Warren Buffett has ascribed much of his success to roughly a dozen decisions over six decades.
Less is often more when it comes to investing. Howard Marks has only made five market calls in his 50 years as a money manager, he noted this week. Similarly, Warren Buffett has attributed the bulk of Berkshire Hathaway's success to roughly 12 decisions over the past six decades.
Marks, the billionaire co-chairman of Oaktree Capital Management, detailed his quintet of calls in a Monday memo. He predicted the dot-com and housing crashes, oversaw the deployment of $7.5 billion in about three months when asset prices plummeted in late 2008, forecasted that stocks would rally from their doldrums in 2012, and recommended buying after the pandemic tanked markets in early 2020.
The veteran investor was right on all five counts, but he underscored in his memo that he's deeply wary of predicting the future.
"'Five times in 50 years' gives you an idea about our level of interest in being market timers," he wrote. "The fact is, we do so hesitantly."
Marks also emphasized that he only makes pronouncements when the market is extremely out of whack.
"One key is to avoid making macro calls too often," he said. "You have to pick your spots – as Warren Buffett puts it, wait for a fat pitch."
Indeed, Buffett has shown extraordinary patience and discipline throughout his career. For instance, he allowed Berkshire's cash pile to balloon to a record $149 billion in 2021, because he couldn't find any compelling purchases. He finally spotted some bargains last year, resulting in Berkshire spending a record $70 billion on stocks and making a $12 billion acquisition.
The famed investor and Berkshire CEO recently underlined how a handful of moves are responsible for most of his company's success.
"In 58 years of Berkshire management, most of my capital-allocation decisions have been no better than so-so," he wrote in his annual shareholder letter this year. "Our satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years."
Buffett pointed to Coca-Cola and American Express as examples. Berkshire paid $1.3 billion for 400 million shares of the beverage giant in 1994 — a stake worth $24 billion today, which yields more than $700 million in yearly dividends.
As for the credit-card titan, Berkshire invested $1.3 billion in the mid-1990s. The conglomerate's position is now valued at $26 billion, and pays $300 million in dividends annually.
"The lesson for investors: The weeds wither away in significance as the flowers bloom," Buffett wrote. "Over time, it takes just a few winners to work wonders."
In their own telling, Marks and Buffett have only made a handful of exceptional calls and bets during their long careers. It's clear that prudence pays in investing, and the right insight or purchase can deliver outsized returns.