I'm curious how many different stocks (and approximate weights) that you hold? Right, that is one of the issues with my investing. I have (had - until today) over 60 stocks. The largest was between 3-4% of the portfolio. You can see a part of the picture at Message 29842604
Unfortunately, if I try to run a concentrated portfolio, it works even worse for me. I've tried couple times to select the "10 horsemen" or 10 best ideas and put money into them (or at least pretend to do that). Mostly my top 10 performed worse than the the remainder of the portfolio. :/ This may have changed a bit, but I don't think it changed in direction that is conducive to what you mention ("huge outsized holding in my portfolio")
Let's look at my recent largest positions: JPM, MGDDY, LMCA, WDC, MHNC, SPND, BKLN, CF, FRFHF, GLW, AXS, RE, MKL, DRAGF, BRKB. Discard fixed income (MHNC, BKLN). Now, the remainder looks OKish, but apart from BRKB, FRFHF, MKL and maybe LMCA, I would not invest more than 10% into each. And BRKB, MKL, LMCA are not cheap in my opinion. So that leaves FRFHF.
Also if I looked back at these stocks, I could not have said which ones are more attractive going into 2014.
I just looked at my largest positions coming into 2014: GLW, MGDDY, JPM, MSFT, DRAGF, CF Message 29265203 . If I kept with these, MSFT would have added to my performance, but half (MGDDY, JPM, DRAGF) would have underperformed anyway. So in the sense, it was good that I had smaller positions in WDC/BRKB/FRFHF that outperformed ... but then clearly I had some smaller positions that underperformed too.
Note that I sold some MSFT early in the year and missed its outperformance. So I did not know which ones were good ideas then and I don't know now. :)
Now, I know what you are talking about when you say:
make it a huge outsized holding in my portfolio. So, one stock becomes the driver of performance until I sell it. This style can deliver 20% years And I agree with you. :) I had couple of these last year, but instead of being outsized holdings, these were maybe 1% holdings at best. I bought TLM when Repsol talks were acknowledged. I made 50% in one day - which resulted in 0.5% gain per portfolio... OK, so maybe that's unfair. KRSL - similar situation - bought some on discussion at CoBF, there was activist catalyst, board agreed to pay $3 divvie in couple of weeks. Also about 20% gain in short time. But again <1% position. And I am afraid I would not have bought TLM or KRSL positions to 10% of my portfolio size... Cause obviously, there are examples where I was wrong. Like AAZ.L (AGXKF).
Overall, looking at 2014, the underperformance was mostly not because positions blew up, but rather that the whole set performed worse than the market. And not necessarily clearly why: the underperformers had warts, but then everything somewhat cheap has warts in current market. MGDDY, BAMXY underperformed - well Europe did worse than expected, but these stocks were cheap, YARIY/DE - OK agri hit the slump, but these stocks were cheap, NOV/other oil stocks - we know the story. Looking back, I can't choose the winner WDC or GLW or MSFT, for example, as somehow being better than the losers. :/ Or to compare apples to apples (pardon the pun ;)): CF vs YARIY/DE.
I guess I could say: don't buy big caps, wait for attractive smallcap or special situations only. Maybe this is the ticket. I doubt that I could brave to put 10%+ of portfolio into such special situations though.
Thanks for asking and for reading a long reply :)
P.S. In some sense a crisis like 2008/2009 might be the best situation for me, because then I can buy widely cheap stocks without concentrating and still outperform. This is assuming that my 2009 result was not a fluke. |
