Introduction: Why Malaysian Investors Should Read Howard Marks
Howard Marks is one of the most respected investment thinkers in the world. He is the co-founder and co-chairman of Oaktree Capital Management, a global investment firm best known for credit and distressed investing. His memos are widely read by professional investors because they focus on risk, cycles, valuation, psychology, and market discipline. Oaktree describes its investment philosophy as centred on risk control, consistency, market inefficiency, specialisation, limited reliance on macro forecasting, and avoiding market timing.
For Malaysian investors, his lessons are very relevant. Bursa Malaysia often moves in themes: technology, gloves, construction, property, data centres, AI, REITs, small caps, IPOs, and politically-linked sectors. Many retail investors chase what is popular. Marks reminds us that the real question is not whether a company is good, but whether the price already reflects too much hope.
The essence of his message is simple: successful investing is not about buying good assets. It is about buying assets for less than they are worth, while controlling risk.
- A Good Company Can Still Be a Bad Investment
Many investors believe that buying a strong company is enough. Marks disagrees. A great company can become a poor investment when the price is too high. A weaker or unpopular asset can become attractive when the price is far below its real value.
This matters in Malaysia. A popular stock may have strong earnings, good branding, and exciting news. Yet if everyone already loves it, the share price may already include those positives. The investor is no longer buying value. The investor is buying expectation.
The real investment question is:
Am I paying less than what this asset is worth?
Mark’s famous memo, The Most Important Thing, states that few assets are so good that they cannot become bad investments at excessive prices, and few assets are so poor that they cannot become good investments when bought cheaply. - Price Matters More Than Popularity
In bull markets, investors often say, “This is a good company,” “This sector is hot,” or “This IPO will fly.” Marks would ask a tougher question:
At what price?
Price is the bridge between a good story and a good investment. A company may have growth, a strong management team, and exciting prospects. Yet if the valuation is stretched, future returns may disappoint.
This is useful for Malaysian retail investors who often react to market themes. A glove stock was attractive at one price during the pandemic, but risky at another. A technology stock can be promising, but not at any valuation. A construction stock can benefit from contracts, but the margin of safety still matters.
The lesson is not “avoid good companies.” The lesson is:
Do not confuse business quality with investment value. - Risk Control Comes Before High Return
Oaktree’s philosophy places strong emphasis on risk control rather than trying to be the top performer every year
This is a powerful lesson for individual investors. Many people focus only on the upside:
“How much can I make?”
Marks would ask:
“How much can I lose if I am wrong?”
This is defensive investing. It does not mean being scared of the market. It means respecting risk before chasing reward.
For Malaysian investors, this applies to small-cap stocks, ACE Market counters, warrants, highly geared companies, and theme-driven trades. The danger is not only price volatility. The greater danger is permanent loss of capital.
A simple rule:
If one mistake can severely damage your portfolio, the position is too large, or the risk is not understood. - Investing Is Not a Clean Science
Marks reminds investors that outcomes are affected by luck, timing, randomness, and human behaviour. A good decision can still produce a bad short-term result. A bad decision can sometimes make money.
This is very relevant in Bursa trading. A stock can rise after poor analysis because the market is excited. Another stock can fall after careful research because sentiment turns weak.
So we should not judge skill from one trade.
One profitable trade does not make someone a genius. One losing trade does not make someone foolish. The better question is:
Was the decision process sound?
Good investors improve their process. Poor investors worship their lucky wins. - Forecasts Are Useful, But Dangerous
Marks is sceptical of relying too much on macro forecasts. Oaktree’s investment philosophy says macro forecasting is not critical to investing and rejects market timing as a core strategy.
This does not mean investors should ignore the economy. Interest rates, inflation, currency, oil prices, and global liquidity matter. Yet no one can forecast them consistently with precision.
For Malaysian investors, this means we should be careful with statements like:
“Interest rates will fall soon.”
“The ringgit will definitely strengthen.”
“The market will rally after this policy.”
“This sector will surely lead.”
A forecast can guide thinking, but it should not become the whole investment case.
Better approach:
Build a portfolio that can survive more than one version of the future. - Average Returns Can Hide Real Danger
One of Marks’ strongest lessons is that investors must survive difficult periods, not only average periods.
A company may seem safe under normal conditions. A portfolio may seem balanced during stable markets. A trading strategy may work for months. The real test comes during stress: recession, liquidity squeeze, earnings disappointment, forced selling, regulatory change, or global risk-off periods.
This matters in Malaysia because many stocks are less liquid than large US names. When sentiment turns, exiting a position can be difficult. A stock that looked safe based on average daily volume may become hard to sell during a panic.
The lesson:
Do not build a portfolio that only works in good weather.
Survival is part of return. - Contrarian Investing Is Not Blindly Buying What Others Hate
Many investors love the idea of being contrarian. But Mark’s version of contrarian investing is disciplined. It is not buying something merely because it has fallen. It is buying when the asset is mispriced and has a reasonable chance of surviving.
A cheap stock can become cheaper. A weak company can stay weak. A falling share price is not automatically an opportunity.
The right question is:
Is the market too pessimistic, or is the business truly impaired?
In Malaysia, this matters for turnaround stocks, PN17 companies, cyclical counters, property names, and unpopular sectors. A low price alone is not enough. The asset must have value, liquidity, staying power, and a path to recovery.
Contrarian investing works best when price, value, and patience meet. - Patience Is Part of the Investment Edge
Marks often reminds investors that being early can look the same as being wrong.
This is painful but true. A stock can be undervalued for months or years. The market may ignore it. Earnings may need time to improve. Sentiment may need time to recover.
That is why patience must come with liquidity and emotional control. If an investor uses borrowed money, oversized positions, or short-term funds, patience becomes impossible.
For Malaysian investors, this is a key point. Many good ideas fail not because the idea was wrong, but because the investor could not hold long enough for the thesis to work.
A practical rule:
Do not buy a long-term idea with short-term money. - The Real Enemy Is Overconfidence
Marks’ work is valuable because it teaches humility. The investor does not control markets, interest rates, earnings surprises, government policy, foreign fund flows, or investor mood.
What the investor can control is:
• the price paid
• the size of the position
• the quality of research
• the margin of safety
• the willingness to say “I may be wrong”
• the discipline to avoid emotional decisions
This is why Marks’ ideas fit well with Morgan Housel’s message. Housel teaches that behaviour shapes financial outcomes. Marks teaches that risk, price, and humility shape investment outcomes. Together, they remind us that investing is not only about intelligence. It is about temperament.