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

To: paulelgin who wrote (46604)	2/15/2012 4:44:50 PM
From: Jurgis Bekepuris	Respond to of 78766

It really depends on you. Don't trust the experts. For some people 1 position works wonderfully, for some 10, for some 250. And if the 1 position person tried to hold 250, they would fail miserably. If 250 position person tried to hold 10 positions, they'd fail miserably too. And both of them could outperform market by holding their "comfortable" number of positions. It also may depend on your experience and on particular set of market circumstances. You might be holding 100 positions, then spot an incredible deal in your circle of competence and then bam you have >50% in a single position. Very few people can do that and execute that well though. ;)

To: paulelgin who wrote (46604)	2/15/2012 5:37:45 PM
From: Paul Senior	2 Recommendations Read Replies (2) \| Respond to of 78766

Agree w/Jurgis Bekepuris. It depends on one's risk profile, one's goals, one's patience level. For you --- given I know nothing about you except that you seem to be struggling with the issue -- I'll assume you're a young guy just starting out, whose eyes light up with the idea of getting results of the "greats" (Burry??) - So my guess is 3-10 positions for you. My reference is pp 242-243 of One Up on Wall Street: "In small portfolios I'd be comfortable owning between three and ten stocks." (P. Lynch) My opinions: 1. Being comfortable is overrated if you want to make big bucks. Overrated in general. 2. Regarding Lynch, the other "greats": There's the element of survivor bias. You don't hear much of the people who kept a few stocks who weren't successful. 3. "He (Klarman)'s only had a 10% position 10 times in the last 20 years." Could this also mean he started with a "3-6%" position and as the position doubled or tripled or more in value, even after selling some shares, the position had just grown to be a 10% position. That would be a "let your winners ride and cut your losers" aspect, which I would view as a tactic within the framework of how many different stocks should I optimally hold in my portfolio. 4. For me, I like to believe (although perhaps just fooling myself) that I control risk by position size. Starting positions, tracking positions, low conviction/cigar butt positions, seemingly high-risk stocks--- their position sizes in my portfolio are smaller than other stocks there...... Uh... have I confused what's being meant by "ideal position size within a portfolio"? My point now seems be there's no one ideal for "position size". That could be different from "ideal number" of stocks. For that too, it depends on the individual imo, as I was referring to in first two paragraphs.

To: paulelgin who wrote (46604)	2/15/2012 8:15:09 PM
From: Paul Senior	Read Replies (5) \| Respond to of 78766

Portfolio positions: I'm re-reading now pages 27ff of Spooner's Do you Want to Make Money or Would You Rather Fool Around? amazon.com It's about a one "Your 'Stake in Life' stock". It's about how Spooner (a stockbroker/author) repeatedly hears variations of this story: "I inherited all this Coca Cola stock from my grandfather, and I took it to (financial people ) and they told me I had too much Coca Cola, that I was too concentrated, and that I had to diversify". "Too risky to have all eggs in one basket." "Spread the proceeds over a variety of investments." To which Spooner replies "I say this is bad advice." This is one of the few writings I've seen where the author it seems to me, argues for a VERY concentrated portfolio. One major stockholding. Spooner in his younger days, talking with a "financial counselor" who advises Spooner to sell down his (Spooner's) large stake in American Express -- because it was the largest part of his assets, says no, he's sticking with all of his AMEX and might be adding more on dips. Because Spooner believed "...If you don't own your own business, you have to own enough stock in a public company to set you free when, and if, the stock moves up substantially in price. " His idea: "...to structure the ideal financial life you should identify, as early in working life as possible, one or two companies that you believe in for the future. They should share certain characteristics": Universal global appeal Instant name brand recognition Products or services you "dispassionately believe" will continue to be in demand "for years" --- I mention this because although I'm a believer in diversification, and I'm a VERY big diversifier, gee, I look back at some stocks that seem to meet Spooner's criteria and that I could've bought them 30, 40 or more years ago, and if I just held on, I would've done really satisfactorily at this point in my life. Better than really good if I had reinvested dividends and/or bought dips. Perhaps it's 20 or 30 or 40 or 50 years too late for me -- time is not my friend now -- I am starting a small tracking position this week in Church&Dwight (CHD). Not a value stock at current p/e. I suspect it could be a stock I might hold though for the remainder of my years. Terrific chart here: finance.yahoo.com CHD's products: churchdwight.com I suspect if I were younger now, and somebody I respected kicked my butt and said, just buy a few shares and put 'em away, you dummy... I might be very happy in 2022 or 2032 that I listened and did. Of course, all jmo, nobody's got a crystal ball that works, and I've been wrong many, many times about many, many things.