Hey Bail,
on the whole diversification issue, there never has been, nor will be I imagine, any consensus around here. Basically I see five separate views, all of which are held by some here.
The first, and ironically least popular, is the canonical winnow-the-basket-into-the-gorilla view set forth in the manual. Few here follow that, and the manual itself doesn't really say much (other than a few vague obiter dicta) about portfolio management in general among gorillas themselves.
Second, also not especially popular here, is the "let a hundred flowers bloom" approach, of which BB is the best example. Lots of small positions in lots of promising things.
Third would be the LindyBill "Russian Army" approach, which involves selling off losers and concentrating into winners (sort of like treating the entire portfolio as a basket), and then ultimately staying hugely concentrated in the best play you can find (appropriate for one's own goals, risk tolerance, etc.).
Fourth would be the "Modified LindyBill" approach, which basically starts with the previous one but then diversifies out into other companies after the Fat Lady has sung--i.e., after one has reached some obscene personal goal and begins to worry about capital preservation as well as wealth creation. Franq is doing this now, and Lindy is talking about doing it.
Fifth and finally, and I believe most popular, is the basic Lynch-Buffett view of assembling a fine portfolio consisting of a handful of gorillas, and perhaps some kings and gorilla-candidates. Thus many of us have, oh, half a dozen different holdings, all tech but diversified by sector, ranging from a few percent up to half or more of the portfolio (that depends partly on recent performance!).
Anyway, this is one of those perennial questions that is never going to be settled, not least because there is no single right answer--it depends on one's own comfort level, boredom level, knowledge base, goals, etc. etc. Since it's been covered a lot in the past, if you "read the archives" you'll encounter diverse views of diversification... :0)
later,
tekboy@thankgod"fjord-man"ishappy.com |
