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

To: Michael Burry who wrote (2451)	11/15/1997 5:34:00 AM
From: John Langston	Read Replies (1) \| Respond to of 78625

Mike: In reading BUFFETOLOGY, numerous times I was struck with the thought that I was hearing the voice of Peter Lynch. (g) Interesting. John

To: Michael Burry who wrote (2451)	11/15/1997 10:47:00 AM
From: Paul Senior	Read Replies (2) \| Respond to of 78625

Mike: re diversification: Well I'm with Graham on this. I say diversify. I say this as a person knowing of the academic discussions regarding numbers of stocks for an 'optimally' diversified portfolio. (The numbers I see are generally larger than 8 but less than 20.) Such academic numbers don't take account of the reality of investing IMO. Furthermore, I think the oh-so-standard line that academic concentrationists take --diversification prevents market out performance --is not thought through nearly enough for real world use. For example, we've seen sector breakdowns (healthcare for example). A person wanting to invest here who already has his/her 8 stocks, either has to have proportionately 1/8 or 1/9 cash avail. - or go margin- or else has to sell one of the 8 stocks already in the portfolio (assuming the person has and wants a balanced $ portfolio.) This means the investor is either reducing performance by keeping large cash or what I think I see more frequently playing off margin or playing "pig at trough" investing ("I see a better stock so I push aside (dump) one of the ones not as strong"). So there's this downside to concentrating a portfolio. (Risk being that now one moves toward trading side of the continuum, away from Buffett/Graham.) Mike, in all these discussions I am trying to understand my own proclivities and balance them off what I see that works. What I think vs. what I see. I'll give you concentrated portfolios ala M. Whitman, Torray, others. Buffett I still say keeps or trades many more stocks than generally acknowledged I believe. And just looking around SI, I only find ONE person with a concentrated portfolio who is doing great compared to many who are crying. Maybe the fault is with the people (too much tech?), but still... given that I want to see what works... diversification looks better than concentration. (And also from Pring... "Place numerous small bets ... not more than 5% of your capital on any one trade", p.217)