Howard Marks: How can an investor with small amounts of capital achieve superior returns?

TL;DR

Is it still feasible to achieve a 50% return per year by investing in small cap stocks? The current low return environment and market conditions make it difficult, but there may still be opportunities for bargains and higher returns.

Transcript

i'm just thinking of another quote from buffett where he said if he started all over again today and was managing very small amounts of capital he thinks he would be able to get uh close to 50 returns per year and do you think what are your thoughts on that do you think that's that's still feasible today what sort of should investors who have very ... Read More

Key Insights

• ↩️ Achieving 50% returns per year in today's low return environment is exceedingly difficult.
• 😘 The current market conditions, marked by low interest rates, favor higher stock prices and make it challenging to find bargains.
• 👲 Ignorance, apathy, and bias can contribute to the existence of undervalued small cap stocks.
• 🛩️ Size bias is a common mistake made by investors, creating opportunities for those willing to invest in smaller companies.
• ✋ Investing in small cap stocks requires a high level of skill, research, and competitive advantage.

Questions & Answers

Q: Is it still possible to achieve close to 50% returns per year by investing in small cap stocks?

In the current low return environment and with the stock market's recent performance, it is highly challenging to achieve a 50% return. Market conditions and high stock prices make it harder to find such opportunities.

Q: What factors contribute to the existence of bargains in small cap stocks?

Bargains in small cap stocks can arise due to ignorance, apathy, bias, or the neglect of the stocks by larger institutions. Lack of attention and pricing inefficiencies can create opportunities for higher returns.

Q: Can investing in small cap stocks be a solution for investors with limited capital?

Investing in small cap stocks can be an option for investors with limited capital, as these stocks may be overlooked by larger players. However, it requires not only capital but also a high level of skill, research, and competitive advantage to succeed.

Q: Are alternative and private markets a guaranteed path to success for small investors?

No, simply entering alternative or private markets does not guarantee success. Even in these markets, one needs to possess superior competitive skills and knowledge to identify and capitalize on opportunities.

Summary & Key Takeaways

• Warren Buffett mentioned the possibility of achieving close to 50% returns per year if he were starting with small amounts of capital today. However, it is challenging to have such high goals in a low return world.

• The current market conditions, with low interest rates and high stock prices, have made it harder to achieve 15% returns, let alone 50%.

• Small cap stocks can offer higher returns, but finding these opportunities requires skill, knowledge, and a willingness to explore lesser-known stocks and alternative markets.