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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: nikkei86 who wrote (41192)	1/26/2011 5:40:04 PM
From: Paul Senior	3 Recommendations Read Replies (1) \| Respond to of 78596

Lol, you got wrong guy when you ask me about diversification, nikkei86. In some ways I'm going to be the most diversified guy you've ever come across --- I almost always carry many more than 200 positions at the same time. Otoh, maybe now --past few months-- not so diversified: I've got more than 50 different positions just in oil related companies. There are, what, maybe 25,000 stocks or more that are publicly traded? What's wrong with trying to find and buy the top 1%, given the criteria that you use? Or in my case, stocks that meet the criteria that I use. My issue with most people as regards diversification is that people don't diversify enough by time. Thus, if you are playing broad market moves, and if you are buying ETFs for that, you are buying all the stocks at the same time for one market move-- so no time diversification there. "I think 10 stocks at most. After that, statistical studies show that the benefits of diversification start to decline." Provide references. Otherwise I say balderdash. There are categories such as growth stocks, value stocks, large cap stocks, small cap stocks, stocks that are being held that are not quite buys or sells yet (time diversification), dividend stocks, reit stocks, foreign small cap, foreign large, foreign value, Graham net-net, special situations. How the Hell can anyone say they are diversified when they have only ten stocks in their portfolio? And I don't believe in 30 either. That's some academic's easy number that looks good possibly because it's when sample sizes move from Studen't t to normal -- supposedly. That number is nowhere near enough for a diversified portfolio to capture max returns with min risk. We can have a conversation about the argument, "I keep a concentrated portfolio of my best ideas, because why should I buy or hold something that is my 31st of 51st or whatever best idea?" Or pay a manager for his 31st or 51st? Because the person is in the market every day and should be alert to price changes which make formerly unattractive stocks very attractive. And things take time to work out, so you can't be switching out of something that looked good two days or two weeks or two months ago for something that looks better now. That way leads to madness and/or ruination. -g- And as stated here by several people, the issue is that one never really knows what one's best ideas are except in retrospect: I am almost always, maybe always, surprised as to what my best performers turn out to be. As a corollary, sometimes the stocks I am most comfortable buying (as for example, my best ideas) turn out to be the stocks that fail to perform as well as the stocks I bought where I was uncomfortable in stepping up or reaching down for them. (i.e. these stocks weren't my best ideas at the time)

To: nikkei86 who wrote (41192)	1/26/2011 6:25:19 PM
From: Madharry	Read Replies (1) \| Respond to of 78596

im not sure where you get your 10 stocks number from. its easy to be confident and wrong and when you manage public money and are wrong on 10% of your assets its tough. I think the best you can find in some focused funds are around 20-30 stocks. Initially i felt like you did. now i feel like if i can make a case for buying a stock thats at a 30-40% discount from where it should be and doesnt have sleazeball management then i should own some. I still have a concentrated portfolio and when slw dropped from $42 to below $30 I could feel some pain. But I am not managing money for others.