Value investor Howard Marks appears to be revisiting the topic of Bitcoin. In a memo to clients at alternative investment management firm Oaktree Capital Management, the company’s co-founder wrote about a conversation with his son Andrew Marks that involved a discussion about Bitcoin.
Marks describes his son as an investor particularly in “growth companies,” with a focus on the technology sector. Himself, Marks has gained popularity for his value investing approach, which he lays out as “quantifying what something is worth intrinsically, based primarily on its fundamental, cash flow-generating capabilities, and buying it if its price represents a meaningful discount from that value.”
Fundamentally, value investing happens from a place of skepticism, Marks explains in the document. “Our default reaction is to be deeply dubious when we hear ‘this time it’s different,’ and we point to a history of speculative manias and financial innovations that left behind significant carnage.”
At the same time, an investor requires “deep curiosity, openness to new ideas, and willingness to learn before forming a view” so as to not miss out on innovation. Innovation often appears “absurd” in its early days, before becoming an obvious development in hindsight.
The memo conveys a change in the investor’s tone in regards to Bitcoin: in 2018, Marks was quoted saying that Bitcoin “will be shown not to have any substance” in the long run. Now, he writes that his natural conservatism and “pattern regulation around financial innovation and speculative market behavior” may have led to his past skepticism.
Marks, who states earlier in the memo that his son “steers [the] family’s ‘upside-oriented investments’ with great results,” writes that Andrew Marks is “quite positive on Bitcoin and several others and thankfully owns a meaningful amount for our family.”
Whether Bitcoin is part of the family’s aforementioned investments is not clear.
Despite the now less dismissive stance towards Bitcoin, Marks has not (yet) ventured down the proverbial rabbit hole, however, as he notes that he finds he is “not yet informed enough to form a firm view on cryptocurrencies,” yet, “in the spirit of open-mindedness, [is] striving to learn.”