Howard Marks

Marks calls it second-level thinking. First-level thinking is: "This company has good prospects — I''ll buy the stock." Second-level thinking is: "This company has good prospects, but everyone already knows that.

The stock is priced for perfection. I''ll pass." Being right about fundamentals isn''t enough.

You also have to be right about what the market already knows and what the price already reflects.

His other major concept: risk is not volatility. Risk is the probability of permanent loss of capital.

A bond that drops 30% in price isn''t necessarily risky if the underlying company is sound and will pay the debt back. A bond that barely moves but is issued by a company about to default is extremely risky.

He thinks most investors confuse the two, constantly.

Joel Greenblatt

Greenblatt made his original fortune through special situations investing — spinoffs, mergers, restructurings, situations where a company goes through some event that causes normal investors to sell without fully understanding what they''re selling. His book "You Can Be a Stock Market Genius" is the definitive guide to this approach.

The core idea is that temporary confusion creates permanent mispricing.

His public-facing work is built around the "Magic Formula" — a systematic method of ranking companies by earnings yield and return on capital, then buying the cheapest, best-quality businesses and rotating the portfolio annually. He tested it on 17 years of data.

It worked. The appeal is that it removes emotion entirely: you run the formula, you buy the list, you don''t deviate.

It''s systematic value investing that any individual investor can implement with a screener and a brokerage account.

Howard Marks

His core ideas, from The Most Important Thing: understand market cycles — everything is cyclical, including investor sentiment, credit availability, and valuations. Recognise where you are in a cycle and position accordingly.

Control risk obsessively — not because you''re afraid, but because avoiding the big losses is the primary driver of long-term returns. Practice second-level thinking — don''t just ask what''s true, ask what''s already priced in.

And be patient. The best opportunities come during crises, when forced sellers are creating discounts that wouldn''t exist in calmer markets.

Joel Greenblatt

Greenblatt''s philosophy is that the market is not always right, but it''s right most of the time — and the times it''s wrong are predictable if you know where to look. Spinoffs are mis-owned.

Bankruptcy restructurings are under-analyzed. Post-merger stubs are ignored.

These are repeatable, structural mispricings, not random luck. His other core belief is that you don''t need complexity to beat the market.

The Magic Formula is simple by design. If something can''t be explained in a paragraph, he doesn''t trust it.

Howard Marks

Marks is deeply conservative about the downside. His framework: focus on risk control, not return maximisation.

Superior long-term returns come from avoiding the big losses, not from hitting the biggest wins. This sounds obvious.

Almost no one actually practises it. He has written extensively about how human psychology — overconfidence in good times, panic in bad times — makes sustained risk control incredibly hard.

He''s comfortable in distressed situations that most investors find too ugly to look at. The apparent ugliness is where the value is.

Joel Greenblatt

Greenblatt''s original risk approach was highly concentrated — Gotham Capital ran 5–8 positions, each thoroughly researched. His thesis was that if you truly understand the situation, concentration is not risky: it''s owning more of something good.

The risk came from being wrong about the situation, not from owning too few companies.

His later Magic Formula approach is more diversified — the formula builds a portfolio of 20–30 stocks — which reduces individual position risk while capturing the systematic returns from value and quality factors. For retail investors, he argues this level of diversification is sufficient if the selection process is disciplined.

Howard Marks

He lives in Los Angeles, where Oaktree is based. He is still active as co-chairman and still writing memos — he''s written over 100 since 1990.

He donates meaningfully to Penn and other academic institutions. He gives speeches at conferences and academic events.

He is considerably more understated than many hedge fund managers of comparable success — he''s interested in ideas, not attention. His son Andrew Marks worked in the film industry, which Marks has described as a source of pride regardless of the career choice.

Joel Greenblatt

Greenblatt is notably private for someone with a significant public profile. He lives in New York, donates heavily to education causes, and has largely avoided the hedge fund celebrity circuit.

He taught at Columbia Business School for years — adjunct professor, not tenured — and treated teaching as a genuine side calling, not just self-promotion. His books are priced like paperbacks, not $997 courses.

That alone separates him from most finance educators.

Howard Marks

2008–2009. When the financial crisis hit, high-yield bond markets froze.

Perfectly sound debt was trading at catastrophic discounts because panic selling created forced sellers. Oaktree, which had been raising a distressed debt fund precisely for this type of environment, deployed capital aggressively through the crisis.

Fund VI, raised in 2008, became one of the most successful distressed debt funds in history. The returns were exceptional because the panic-induced discounts were exceptional.

Marks had been writing about exactly this type of opportunity for years. When it arrived, he was ready for it.

Joel Greenblatt

The Gotham Capital era from 1985 to 1994 is the biggest win. Approximately 50% annualized gross returns for a decade.

The exact mechanics varied — spinoffs, workouts, value situations — but the result was one of the most consistent runs of outperformance in hedge fund history. Some of his best individual trades came from spinoffs: companies that are spun off from larger parents tend to be misunderstood and mis-owned (institutional investors who didn''t want the spinoff dump the shares), creating a window to buy quality businesses at a significant discount.

That insight was the core of his original edge.

Howard Marks

By his own account, he''s avoided most of the disasters. His framework is explicitly designed to prevent catastrophic errors.

The closest thing to a meaningful mistake: being too early warning about the dot-com bubble — he published a memo in January 2000 laying out why tech valuations were unsustainable. He was right, but the bubble ran for another three months before collapsing.

Being early is expensive. He''s also honest that avoiding spectacular losses sometimes means missing spectacular gains — that''s the trade-off he''s consciously made.

Joel Greenblatt

Greenblatt has been relatively quiet about specific losses, which is either admirable discipline or good PR management. The honest critique of his career is the second-act problem: Gotham Asset Management''s quantitative value approach has had meaningful periods of underperformance, particularly during the 2010s when growth stocks dominated and systematic value investing struggled badly.

From 2014 to 2020, value strategies broadly failed to deliver. He has remained committed to the approach — which is consistent with his philosophy — but it means some investors in his funds had a rough decade.

Howard Marks

Howard Marks grew up in Flushing, Queens. He studied finance at the Wharton School of the University of Pennsylvania and got his MBA from the University of Chicago Booth School of Business.

He started his career at Citibank, where he ran their bond department and later their convertible securities and high-yield debt portfolios. He moved to TCW Group in Los Angeles in 1985 to manage distressed debt and high-yield bonds.

In 1995, he co-founded Oaktree Capital Management with six colleagues from TCW. The idea: focus specifically on alternative and distressed investments — high-yield bonds, distressed debt, convertible securities, private credit.

Oaktree went public in 2012 and was acquired by Brookfield Asset Management in 2019 for $4.7 billion. Marks stayed on as co-chairman.

Through all of it — from 1990 to today — he was writing the memos.

Joel Greenblatt

Joel Greenblatt grew up in Great Neck, New York, and was a finance nerd from early on. He went to Wharton for undergrad and then got his JD/MBA from Wharton as well — staying in the same place twice in a row, which tells you something about how much he liked it.

He started Gotham Capital in 1985 with a $7 million seed investment from Michael Milken (yes, that Michael Milken), which is either a great origin story or an awkward one depending on your view of junk bond history.

Gotham's results were absurd. From 1985 to 1994, the fund returned approximately 50% annualized gross returns before returning outside capital to investors.

He made himself and his partners wealthy, then essentially closed the fund to outside money because he didn't need it. He then spent the next decade teaching at Columbia Business School and writing books that made his investing approach accessible to ordinary people.

In 2009 he started Gotham Asset Management, a new vehicle that runs quantitative value strategies.

Howard Marks

Oaktree Capital Management, co-founded in 1995, manages roughly $170 billion across credit strategies. The firm specialises in high-yield bonds, distressed debt, senior loans, convertible securities, and real estate credit.

Distressed debt, in plain English, works like this: when a company gets into trouble, its bonds get cheap. If the company recovers — or even partially recovers — those bonds can multiply in value.

The skill is telling the difference between a company that''s temporarily distressed and one that''s actually going bankrupt. Marks has been making that call for 50 years.

Oaktree was acquired by Brookfield in 2019 for $4.7 billion — a reasonable indicator that the track record speaks for itself.

Joel Greenblatt

Gotham Capital, his original hedge fund from 1985, is the thing the legend is built on. 50% annualized gross returns for a decade is one of the best long-duration track records in investment history.

He returned outside capital in 1994 because managing too much money would have crushed his returns — which is a sign of someone who actually understands investing, not just fundraising.

Gotham Asset Management, launched in 2009, runs quantitative value strategies using his "Magic Formula" approach. It manages several billion dollars across multiple funds.

The track record since 2009 has been solid but not legendary — large-scale quantitative value investing is a different game than the special situations work that built his original reputation.

He is also on the board of Harlem Children''s Zone, a nonprofit he cares deeply about, and has donated tens of millions to education initiatives.

Howard Marks

Wharton School of the University of Pennsylvania, BS in Finance summa cum laude, Phi Beta Kappa, 1967. University of Chicago Booth School of Business, MBA, 1969.

He has said that Chicago — where the efficient market hypothesis was gospel — taught him exactly what the prevailing wisdom was, which made it easier to know when to disagree with it.

Joel Greenblatt

University of Pennsylvania (Wharton), BS in Economics, 1979. University of Pennsylvania (Wharton), JD/MBA, 1980.

The double Wharton is unusual. Most people do one or the other.

He did both in consecutive years, which suggests either extraordinary efficiency or an extreme affinity for Philadelphia.