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  • shb600 commented on Geoff Gannon's article 12-05 16:43
    Why I Concentrate
    Someone who reads my blog emailed me this question: “What is the maximum concentration you would employ in any single stock, why, and under...
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    shb600 12-05 16:43
    • Urban Investments- A moat is in the eye of the beholder. I have seen stocks that people think have a moat and it turns out not that much of a moat. If we gave different investors a thousand stocks and said, "Tell me which ones have the strongest moats." We would come up with all kinds of different answers. For example, KO has a pretty dominant moat in soda, but it is also a category that is on the decline. So, how good is the moat if their overall share of the drink market is shrinking. The stock has been flat since 1998.

      Batbeer2-I like your articles. I think it is a lot of over-confidence and hubris to say these are the 5 best ideas and they are so good that having a 6th idea would really hurt my returns. That being said an individual only has so much time to research each stock and keep up to date on them. But if you have the time you shouldn't be in only 5 because there are too many unknowable factors. People are kidding themselves.

      Buffett's 20 punchcard has been used 5 or 10 fold or more now. There is one Buffett I don't think anyone can do what he's done. Predicting where a business is going to be 5-10+ years in the future is nearly impossible for everyone, except maybe Buffett.
  • shb600 commented on Geoff Gannon's article 12-05 10:08
    Why I Concentrate
    Someone who reads my blog emailed me this question: “What is the maximum concentration you would employ in any single stock, why, and under...
    View all 5 comments
    shb600 12-05 10:08
    • Enjoy your articles. Ultimately, how much can a person know about a business, industry or the people running the business? There is always that VRX type risk when you overly concentrate a portfolio.  If Sequoia, Ackman and other very smart/talented people can be taken for a ride with all the ability to analyze plus access to management maybe overly concentrated portfolios are just too risky.

      I have seen Andrew Welling at Lyrical say that he may be able to order his favorite stock investments from 1 to 33. But when he actually analyzed the performance he could never predict which stocks would perform best. Sometimes his 5 least favorite ideas would be the best. So he chose 33 stocks each equally weighted to start out.

      Everybody thinks their 5 or 10 stocks are the best, but everyone is coming up with a different list. So you have all these people with all these different portfolios, fully confident they have picked the right 5 or 10 stocks. That's a lot of over-confidence out there.

      There is only one Buffett. To think that people can get Buffett like results means you have to be single-mindedly focused to read hundreds of annual reports a year. I just don't see many people who even if they had the time could or would do the things Buffett has done. Even if they did, could they connect the dots, analyze a stock correctly like AXP in the Salad Oil Scandal and predict that rather than bankruptcy or a brand that is damaged beyond repair, that it is going to be an unbelievable investment. Even early in Buffettt's career he had enough capital to help determine the outcome in a lot of investments. Not many people can do that unless they have tens of millions and are dealing in very low market cap stocks.
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