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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Keith Feral who wrote (81043)	9/21/2000 4:11:16 PM
From: Jacob Snyder	Read Replies (2) \| Respond to of 152472

Your list of companies that have stayed overvalued for years, could be countered with an equally-long list of companies that became Darlings Of The Market, soared to the high end of their PE range, came down, and never recovered. Dotcoms. Energy companies a generation ago. Railroads a century ago. The trick, of course, is to find the ones that will execute quarter after quarter, year after year, and continue to justify high valuations. There is a very short list of companies that can do that. A handful, out of the thousands of listed companies. You are right in thinking I don't believe in diversification. During my first year of investing, I put 100% of my money in one stock (AMAT, in 1996). Then, I diversified, by adding a second stock (CSCO, in early 1997). Currently, I'm up to 5 stocks, and trying to add a 6th, QCOM. I read all the arguments in favor of diversification, thought about them, decided to do the opposite, and have outperformed the market by a very wide margin every year (but maybe not in 2000). My take is: the only benefit in diversification is reducing short-term volatility. It does not increase longterm returns, or reduce longterm volatility. And it requires so much effort to really understand a stock, it is not possible for me to add more than one stock a year to my portfolio. Statistically, you can get a maximum reduction in short-term volatility with 8 stocks (they have to be in 8 separate industries, so they move independantly). Further diversification yields no benefit at all.