In it, he discusses the concept of portfolio concentration, but with a twist. He believes super-concentrated portfolios require a blend of manager and capital attributes that only a few investors have. Therefore, some small positions are worth having as long as they add a unique element that contributes something to the payoff profile of the portfolio as a whole. He discusses how combining large concentrations of his best ideas with a number of smaller positions improves both returns and reliability of returns.
In this presentation he:
- Lists the various methods of value investing
- Discusses four investment ideas and reasons for their smaller position size in his portfolio
- Reviews the portfolio concentration of noted value investors
- Outlines the Centaur Portfolio Model for position sizing, long and short
- Points out various truisms and food for thought to assist an investor in judging how concentrated to be
I found it to be illuminating since there’s not much literature with respect to portfolio management. I hope you’ll find it interesting as well. You can read the full presentation here.
How concentrated are you? What are your portfolio management guidelines? I look forward to your responses.