An Ode to Diversification

Investment Analysis Clubs Saul’s Investing Discussions
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I think that diversification doesn’t get the recognition that it deserves on this board. I can understand that from the perspective that diversification is not “Saul’s Way”. While many are here to more closely emulate Saul, I think we’re all here to improve the performance of our portfolios. Here is why I think diversification can help instead of hinder…

The other day, I was listening to a recording where Tom Gardner interviewed David Gardner. I can’t provide a link – it comes from a subscription service. David’s main emphasis (or at least my main takeaway) was the importance of letting an investment grow over time. One doesn’t generally get multi-bagger performance by selling winners. Even lightening winners tends to negatively impact performance over the long-term. But that isn’t the point that I wanted to stress in this post, although it provides a foundation.

David stressed careful stock picking, but also recognition that he was probably going to be wrong about half the time, and probably closer to 60%. If you’re wrong 60% of the time, how do you make money? The answer lies in the asymmetry in straightforward stock investment (I’m not including arcane strategies like options or shorting here). You can never lose more than 100% of your investment in a stock, but a good selection can return well in excess of 100% of your investment, over time. In other words, a single multi-bagger can overcome the poor returns of several other choices.

I certainly understand the theoretical appeal of an argument like: “Why on earth would you invest in a stock that is your fiftieth-highest conviction?” My counter-argument would be: “Why should I have the temerity to assume that stock performance will correlate very strongly with my convictions?” Maybe, like Saul, if you have a proven track record that performance does correlate with conviction, you can make such a bold assertion. I, for one, cannot. Yet, I’ve been successful enough in the stock market to retire young. I think diversification has helped me immensely. I’ve been able to pick my fair share of multi-baggers despite the fact that they weren’t always my highest-conviction holdings. Over the years, I’ve bought a lot of stocks. I’ve made very few (but certainly some) sales that I’ve regretted. But a lot of my returns have come from a relatively small percentage of the companies I’ve bought and held.

I want to quickly share two examples. In 1997, I decided that I wanted to buy a basket of five biotechs, and size that basket to be equivalent to two normal purchases in my portfolio. I agonized over several dozen companies, and ultimate chose six because I couldn’t narrow it down to five. Almost twenty years later, only two still exist as independent entities. But the one that did best was basically my sixth choice that I couldn’t convince myself to discard. The basket – winners and losers – is a bit behind the S&P 500 today, but it has been ahead at times when biotechs are in favor. But again, my main point is that it was my sixth choice that salvaged the whole operation.

I bought NVDA very early in 2004. By late 2007, I felt like a genius. However, by 2012, I was feeling less certain about the holding. It still had a nice gain for me, but hadn’t done much more than offer me head-fakes in the prior five years. I was seriously thinking about retirement at that point, and also thinking seriously about my investments needing to generate income (I feel less strongly about that today than I did in '12). I almost sold NVDA, which means – practically by definition – that it wasn’t a high-conviction holding. Thankfully, they introduced a dividend in late 2012, and that stayed my hand. NVDA has been a very solid performer over the last four years, arguably ridiculously-good in 2016. I still hold all those shares from 2004.

So, what do these anecdotes prove, if anything? I think they prove that I’m personally not particularly good at having my highest-convictions match my best performers. But I think it also proves that I’m a good-enough stock-picker that my portfolio will include its share of big winners, if I give them the time to succeed.

It might be a good exercise – especially for the novices reading this board – to rank your stocks in order of conviction, and hide the list for two or three years. Then revisit it and see how you did. If your results please you, then you should probably run a concentrated portfolio. If they dismay you, you might want to consider alternatives, and I’d suggest diversification as one of those alternatives. I think the key thing is to figure out how YOU succeed, and mostly stick with that plan.

I’m willing to acknowledge the possibility that my correlation between conviction and subsequent performance MIGHT improve if I were following fewer companies. But I’m not sure I’m willing to BET my portfolio on that possibility at this late stage in the game. Maybe I should take my own advice and rank the five or six companies that I know best, and seal it in a “Open in 2020” envelope. That would be interesting… They’re all so different – special in their own way, like children.

OK… Back to studying up on my company that will report earnings tomorrow morning…

Thanks and best wishes,
TMFDatabaseBob (long: NVDA, and the two-of-six biotechs still standing)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

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Calling Diversification Diworsification is more than just a play on words, it’s truth.

If you want to be truly diversified, then you should be in index funds and real estate and precious materials, etc. You’ll follow the markets and do as well as them.

For me, what’s interesting is that despite the apparent success of TMF’s stock picking services (like Stock Advisor or Rule Breakers), the Real Money Services (MDP, Special Ops, Global Gains, Pro, Supernova etc.) are mixed: some have been closed due to poor performance, others struggle, and only a few are doing well compared to the indices. So, diversity is not some saving grace for a real money portfolio and those are the only ones worth discussing in this evaluation.

The cliche about one multi-bagger making up for many losers, and buying only a little of each because “if it does poorly, only want to lose a little, but if it does well, a little is all you’ll need” is BS in my view.

There’s also what diversity really is. Your example of the 6th biotech stock saving the basket does’t support diversity - they’re all biotechs!

Everyone is going to have a different number of stocks with which they feel comfortable. Whether that’s 6 or 16 or 60 or 600 is up to the person. But, there is a argument to be made that fewer companies that you know better and for which you have a higher conviction can make you more money than many companies that you ignore on a rotating basis.

Saul’s strategy is to evaluate often and take action immediately. There is an obvious limit to how many companies one can follow closely enough with this strategy, so diversification is at best a second order consideration where we avoid owning many companies in the same sector.

Picking stocks is hard: you essentially have to predict the future better than everyone else who is considering investing in that company. It’s not for the faint of heart, it’s not for trigger-happy traders, and it’s also not for people who want to buy stocks and forget about them for long periods of time.

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If this works for you, Bob, and you acknowledge the limitations of the approach (for instance that it will never deliver periods of Saul-type exceptional returns, like a triple digit year or something), then great! But do you consistently outperform the S&P and Russell by enough to make it worth all your time you put in?

The point F1 was making, I believe, is that if you have enough stocks that your returns approach market returns, why bother?

Bear

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For me, what’s interesting is that despite the apparent success of TMF’s stock picking services (like Stock Advisor or Rule Breakers), the Real Money Services (MDP, Special Ops, Global Gains, Pro, Supernova etc.) are mixed: some have been closed due to poor performance, others struggle, and only a few are doing well compared to the indices. So, diversity is not some saving grace for a real money portfolio and those are the only ones worth discussing in this evaluation.

Hi Smorgasbord, I tend to agree. It’s the difference between a series of recommendations and a real-money portfolio. Here’s what I wrote about it in the Knowledgebase:

To simplify, the MF point of view is that if you buy the same amount of 19 stocks and 18 do terribly but one is a 20-bagger, the one that is a 20-bagger will make up for all the losses. Therefore you should never sell your losers. That works in theory, and on paper, but in the real world, if it’s a portfolio with your money in it, it doesn’t work at all. That’s a pretty radical thing to say, so I’ll make clear why it is so.

First of all, if you don’t sell any of the successful stock on its way to becoming a 20-bagger, it soon becomes 70% or 80% of your entire portfolio, as the losers shrink. Now you have a portfolio with 19 stocks but one is 75% of the entire portfolio. You are not going to sleep nights with one stock at 75% or more of your portfolio and bouncing up and down. Not with your real money in the portfolio. Remember, this stock doesn’t have a sign on it saying it will end up as a 20-bagger. It’s just a stock and all you know about it is that it’s now 75% of your portfolio and bouncing up and down (like any stock does). You will probably sell some of it at varying points all the way up, keeping it at a maximum of 20% or 25% of your portfolio, or maybe less. And the rising stock will thus never balance all the losers.

Add this to the fact that the ones that go down keep sopping up more and more percent of the total investment as you “double down,” “reduce my average cost,” “buy at better value points,” and generally put in more and more money in at lower and lower prices. For example, on the WPRT board, when the price dropped from $32 to $25 lots of people felt it was a bargain, and bought more, and at $20 “doubled down”, and “doubled down” a second time at $15, etc. (If you don’t believe me, just read back through the board). It’s hard for people to see a stock they believe in go down to what they think are ridiculously low levels without buying more (It was at $2.79 when I wrote that for the KB. Today it’s at $1.08) especially when it’s misleadingly still labeled a “Buy.” They’ve got this “Buy” that is down to half what they paid for it. Of course they will sell some of a winner that is making them nervous to buy more of the “bargain” stock.

Unfortunately, if you had 18 stocks that went to zero and one that was a 20-bagger, you probably would have ended up putting much more into each of the ones going down than into the one that went up, AND you would have sold a lot of the one going up on the way. It’s natural. I’ve done it myself but try hard not to do it any more. Which is why the MF hypothesis doesn’t work in real life. It’s the difference between a series of recommendations and a real-life, real-money portfolio.

JMO

Saul

By the way, if you look at the active recommendations for Stock Advisor, as I once did, you’ll find out that two of the first six recommendations back in 2002, are listed as Disney and are up over 5,500% and 3000%, and there are two more Disney’s in the next seven recommendations. (Some may have been companies acquired by Disney). As you may guess Disney makes up most of the portfolio. If there are 300 recommendations, I don’t remember exactly, but the entire portfolio, dollar-wise, is something like 60% Disney and 40% for the other 299 recommendations. A new recommendation now is such a tiny percentage of the total portfolio dollars that how it does is meaningless. It was great picking Disney, but if it was a cash portfolio, would they ever have let it grow to 60%. No way! And if you just bought all the current recommendations after the first year or so, and missed those four Disneys, would you even be beating the S&P.

And finally, why hold on to your failed positions? They have little going for them except that you are already in them. I doubt you would dream of buying most of them now if you didn’t already have a position in them. I just don’t think you should hold on to a poorly functioning company on the basis that it might transform itself into something successful some years from now.

Just my way of looking at it.
Saul

For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.

A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board

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Hi Bear.

“If this works for you, Bob, and you acknowledge the limitations of the approach (for instance that it will never deliver periods of Saul-type exceptional returns, like a triple digit year or something), then great! But do you consistently outperform the S&P and Russell by enough to make it worth all your time you put in?”

I believe that I am outperforming. I haven’t chosen to apply Saul’s rigorous method for internal rate of return calculation, which would correct for inflows and outflows. But the beginning and ending numbers most years tell me I’m doing OK.

But the “worth your time” is an interesting point. Yes, I like to travel, get on my bicycle, enjoy fine food and wine, etc. But I find investing fascinating, and I’m not sure that the time I spend on it is wasted. I don’t encounter many forms of entertainment that pay me instead of vice versa!

Hi Smorg.

I’m not going to try to refute you point by point; we disagree and that’s OK – I’ve long respected your posts. But I want to clarify one thing… My point with the basket of biotechs was that I decided how much of my portfolio I wanted to allocate to biotechs. That was one diversification decision, because it was a small percentage. Biotechs are pretty risky, as evidenced by my two-out-of-six survival rate. Buying the one I liked best, instead of buying the basket as I did, would have led to a 100% loss, instead of a return that almost matches the market. That was a second-level diversification decision, and I’m glad I did it.

One last point… Managing my own portfolio – rather than investing in ETFs or mutual funds – allows me to be more tax efficient with the timing of my sales. One of my big tax time frustrations these days is the uncertainty of what December mutual fund distributions will look like and how they’ll affect my taxes. That’s one reason they’re among the first vehicles getting sold to fund my retirement.

Thanks and best wishes,
TMFDatabaseBob (long: a good bicycle, fine wines aging nicely, a diminishing supply of mutual funds, and a collection of interesting stocks)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

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Hi Saul. I hadn’t seen your post yet when I responded to the others…

You ask, “And finally, why hold on to your failed positions? They have little going for them except that you are already in them. I doubt you would dream of buying most of them now if you didn’t already have a position in them. I just don’t think you should hold on to a poorly functioning company on the basis that it might transform itself into something successful some years from now.”

In my post, I said “I’ve made very few (but certainly some) sales that I’ve regretted.” (emphasis added) I will sell when I’m pretty sure the thesis is broken. Sometimes I may try to time that sale to squeeze out a little more return, but sometimes not. I’m sure there are some I hold too long, but I do cull losers. I agree that it’s important, although I know that I’m much slower to declare a thesis “broken” than you are, Saul.

The point of “would you buy most of them today” seems to have an underlying message that every day is a clean slate, and you should (mentally) sell everything and decide what to buy. That seems antithetical to long-term buy-hold, so I’m not sure I’m quick to embrace it. The holdings seemed worthy when I bought them and (for most of them) I haven’t decided they’re broken yet… Let’s give them a bit more time…

Thanks and best wishes,
TMFDatabaseBob
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

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That seems antithetical to long-term buy-hold

Remember, as Andy might say, buy and hold is dead. Kidding really, but I do think it’s probably something not to be enshrined as the best method. I’d suggest a modified buy and hold approach :slight_smile:

http://discussion.fool.com/modified-buy-and-hold-32203068.aspx

Bear

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Hi Bear,
My name is a joke on all the people in 2009 that were running around saying Buy and hold is dead. That is when I joined the Fool and I thought it an apt name because anyone who bought in 2009 and held on probably had great returns. I guess some people would consider it dry humor :slight_smile:

Andy
Who would never tell anyone that Buying and holding is a bad idea

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Bob,
I have a concentrated portfolio, but I think I represent somewhat of a hybrid between you and Saul and many of the TMF philosophies. Here’s my thoughts on concentration for what it’s worth.

  1. Don’t let your allocation get so large you loose sleep or start small enough that you can weather the ups and downs. I think this is a reason that many keep their allocations small to start is that a dramatically loss won’t psychologically scar them. If it grows, the feel they can loose the “house’s money” and be fine. For me, there is no upper limit allocation limit so long as I am confident that the thesis is intact. I have had one company explode to 65% of my portfolio. That said, I have no allocation bigger than 9% today.

  2. As much as you can, know what you own so that you can weather ups and downs of the market. I think this is an argument to have a more concentrated portfolio like Saul recommends. I am not sure how any working professional could adequately follow more than 20 stocks. I have 15. If you know the you own solid business, you know that downturns in the market probably won’t kill you.

  3. Enter a stock slowly. This is where Saul and I vary greatly. For most investments, initially, I invest 1%, 2% when news further confirms my thesis (usually after the next earnings report), and add 3% on the next favorable earnings report. If the stock is solid, I will hold until the thesis is broken, usually 3-5 years. If it is a dog, I will get rid of it ASAP. That might take a few quarters to figure out, but I have limited my losses by not over investing in a bad idea. I rinse and repeat until I find a solid position. I do this for the most part to protect me from me. I am always seeing shiny objects so sticking to a process keeps me from becoming a trader.

  4. Get out as soon as a broken thesis is confirmed. I am a LOT slower getting out of a stock than Saul, but much quicker than TMF. I am 80% correct in my sales decisions, but I need to have proof that my thesis is busted. I did get out of Infinera, a quarter later than Saul."

  5. Don’t get out until the thesis is broken I implemented this rule to protect me from myself. After, I am in something, I tend to get bored. For me it’s a bit of a rush to find a company, imagine its potential, then purchase it. I won’t sell to purchase a “better stock.” My results are better, hanging tight. For example, I have owned SWKS for over two and a half years. Margins still holding strong, and 5G and IOT are tailwinds. I am happy staying the course.

This approach has beat the market over the last 18 years by about 4.9%, though the devil is in the details of identifying the correct stock.

Best,

bulwkl

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There are a couple of points worth making on the quota idea (before Saul rightly exiles us all to another board).

‘Why on earth would you invest in a stock that is your fiftieth-highest conviction?’.

This is our old friend ‘the straw man’ where a misrepresentation or fallacy is deliberately erected by an arguer so he can then easily shoot it down, thereby scoring an illegitimate point.

Your 50th. (et seq.) holding is not your ‘fiftieth-highest conviction’! It is bought because all your others, while their businesses are doing very well and should on no account be sold, do not represent the combination of value and quality you have now found. It is therefore a valuable addition to the portfolio, improving the overall potential for gain.

Secondly, surely I do not need to run off the list of eminent investors with documented returns who held or hold large numbers, often hundreds, of companies’ stock in their portfolios? What misguided creatures they were!

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Bob, I took the liberty of taking your list and substituting the number of equities for dollar weightings in each sector and plotted them. FWIW, I’ve never seen a portfolio so close to the S&P 500, except the index itself. :slight_smile:

Compared to my investing, you’re a fine-tuned machine! Looks like you’re a tad heavy in services there, Bob. LOL, I bet that’s the Rule Breakers influence. :slight_smile:

Dan


**Sector...............	Bob	S&P 500**
Basic Materials......	3.57%	3.14 %
Capital Goods........	5.95%	5.15 %
Cons Cyclical........	5.95%	3.03 %
Cons Non-Cyc.........	5.95%	8.17 %
Energy...............	5.95%	6.59 %
Financial............	5.95%	16.99 %
Health Care..........	8.33%	13.38 %
Services.............	30.95%	20.98 %
Technology...........	26.19%	20.02 %
Transportation.......	1.19%	2.43 %
Totals...............	100.00%	99.89 %
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. . . but the entire portfolio, dollar-wise, is something
like 60% Disney and 40% for the other 299 recommendations…
but if it was a cash portfolio, would they ever have let it
grow to 60%. No way!

Bingo!

But Saul, that is also making Bob’s point. If you never sell, you’d
still have a billion dollars worth of Disney! And who cares what
happened to your Select Comfort shares?

I personally take the more concentrated view, but I see the other
side too. And you can’t (I can’t, anyway) hold on to a billion dol-
lars worth of anything. There were no signs on Disney shares that
said the shares wouldn’t ever tumble and crash. BWLD, ditto. MSFT,
ditto. GOOG, ditto., etc., etc., etc.

Personally I’d like to merge your philosophy and Bob’s. Buy only
the rockets and keep them forever. If only you turkeys would tell
me which ones are headed for the moon. Please?

So many ways to get rich, and I don’t haven’t the patience to follow
a damned one of them. :slight_smile:

Dan

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On the ten-bagger issue, I once and only once let a stock grow to 50% of the portfolio and sold it when I saw it was not going to make it based on business fundamentals.

Peter Lynch coined the term ten-bagger and it is worth thinking about how he managed them. Reputedly there never was a stock Lynch didn’t like. Indeed, he had a huge number of stocks when he ran the Magellan Fund but they were not evenly distributed, he had a smaller number of core holdings and a long tail of potential ten-baggers. Seen in that light these tiny holding were not likely to become huge in short order.

Due to my lack of attention span I used to have several small positions just to make sure I tracked them. I’m now using a wish list which is not doing as good a job. Improving the alert feature is on my to-do list.

Denny Schlesinger

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The point F1 was making, I believe, is that if you have enough stocks that your returns approach market returns, why bother?

Why bother is right. The Russell 2K returns 12% annually over the long haul. You will be amazed what a fortune you can build by starting early and compounding 12% annual.

#6

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‘Why on earth would you invest in a stock that is your fiftieth-highest conviction?’.

This is our old friend ‘the straw man’ where a misrepresentation or fallacy is deliberately erected by an arguer so he can then easily shoot it down, thereby scoring an illegitimate point. – strelna

Should I be as rude as you and label your statement a lie and you a liar? Because that’s what it is.

I feel bad writing that, but you’re begging for it by saying I’m deliberately lying.

Your 50th. (et seq.) holding is not your ‘fiftieth-highest conviction’! It is bought because all your others, while their businesses are doing very well and should on no account be sold, do not represent the combination of value and quality you have now found. It is therefore a valuable addition to the portfolio, improving the overall potential for gain.

Obviously, we have different ways of looking at the world.

Are you familiar with the parable of the pearl of great price? The merchant sold all he had to buy it. He sold off his lower conviction items to focus on the high conviction item.

When I find an exceptional stock opportunity, I’ll liquidate as many other positions as necessary to fund the exceptional…. and I’ll weight it accordingly. To put it in historical terms, I’d sell my 5% position in Fuddy Duddy Amalgamated and my 5% position in SloGro R Us to buy that young Apple company because Apple is now my best idea (closer to being #1 instead of #50).

Should I have held Fuddy Duddy and SloGro because they’re doing well? Perhaps…. if I lack conviction for Apple. Or if I’m afraid of the tax effects. But for me, I’ll buy the one that offers the greater return…… because it’s my “better idea” (closer to being #1 instead of #50).

Another way of looking at it: I’ve got five companies “doing very well and should on no account be sold” and they’re growing at 5% per year. I then come across a company with a wide and long highway of growth that is growing at 20% per year. I have “great conviction” that my five slow growers will continue to grow, but for me…… it’s all about the return. Is it in my best interest to grow my portfolio faster or slower? To do so, should I invest in the faster or slower growing companies? Will they be my best ideas or my lesser ideas? So…… will that fast growth company be a better (and higher rated) company than the slow growers? Answer = Yes. And, if I look at a subset of all ideas, that fast grower will be #1 and the others will bring up the rear at numbers 2 through 6. Expand the thought…… and I’m investing in my top ideas, not #50.

I’m sure you get my point even if you disagree with the idea of abandoning what I call “the lesser companies” that are NOW my lower rated ideas.

Secondly, surely I do not need to run off the list of eminent investors with documented returns who held or hold large numbers, often hundreds, of companies’ stock in their portfolios? What misguided creatures they were!

Those eminent investors with documented returns are investing many billions of dollars. Pretty tough to invest in a small number of high growth companies with that much money. Unless you invest in really big companies like Buffett. Behold! WHAT IS THIS?!?!? He’s known for investing in a small number!!!…. and he is the source of my initial quote in this thread.

Anyway, I’m done.

And do us all a favor by not accusing someone of lying without proof. Quite distasteful.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

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The Russell 2K
#6 - is that the US small cap? Also is that with dividends produced i.e. total returns?
Thanks
Ant

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The Russell 2K
#6 - is that the US small cap? Also is that with dividends produced i.e. total returns?

Yes. US 2000 small cap stocks, dividends included. Here’s an interesting chart for various indices performance covering 1980-2013.

http://financeandinvestments.blogspot.com/2014/01/1980-2013-…

Same old story. Small beats large, value beats growth.

#6

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Jeepers! You would think we were talking Trump vs. Clinton with how personal this all got. Crimeny!

I look at it this way, if you hold 5 stocks, each stock has the potential to ding you 20% at worse case scenario. You own 10, then 10%.

Given this, I don’t see why more than 10 stocks are necessary. Some people, if they hold enough quality stocks and are willing to ride the ups and downs of the market, and are buying new stock every month, I think you can get by reasonably on 5.

I admit, that I have often been down to 1 or 2 stocks. But you know, nature has a way of hammering us down. I have found, that almost without fail, that the stocks I have held at about 20% of my port, the real scary ones that I was so tempted to go 100% on, have been my best performing stocks.

Whereas, the one’s I have subsequently gone 50-100% on have been the failures. Not many failures mind you, but it does not take that many failures.

Seems, except for the very few and the very lucky, nature wants us to be long-term investors. To EARN our money, and not making it one lucky risky gamble.

Let your winners run, no matter how large a portion of the port it becomes, until it is time to sell them (that is another thread and I have specified those conditions many times on other threads here, and on other boards).

Don’t necessarily dump your losers, if there is reason not to. I have determined that almost every great company I have invested in, except during a true bubble, has recovered within 24 months and gone on to great returns.

The best thing to do, is what Motley Fool does not want us to know (although they teach us to do it), and which is against the interests of an entire brokerage and media industry…don’t do anything. We are passive investors, let the businesses grow in their value for you over time.

Sure, sure, I’ll be panned for it, given examples of this or that or the other thing, but of all the remarkable investments I’ve made over the years, incredulous timing, etc., it still cannot beat holding great companies and letting the companies build themselves over time.

As stated earlier, there are always caveats, etc., for another thread if you want. But learning to not fret, not over analyze, not thinking yourself too smart so that you are smarter than the market etc., has been the way to superior returns.

Perhaps the future will differ, perhaps it will not.

Tinker

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All,

By the way, if you look at the active recommendations for Stock Advisor, as I once did, you’ll find out that two of the first six recommendations back in 2002, are listed as Disney and are up over 5,500% and 3000%, and there are two more Disney’s in the next seven recommendations. (Some may have been companies acquired by Disney). As you may guess Disney makes up most of the portfolio. If there are 300 recommendations, I don’t remember exactly, but the entire portfolio, dollar-wise, is something like 60% Disney and 40% for the other 299 recommendations.

Let me jump in here since I think SA is today a bit more diversified than Saul gives it credit for. Here is the math (status today): there are 219 recommendations (rec’s, not stocks) in total. Out of these the top holdings are:

  • Netflix, 6x recommended, 28% of the portfolio
  • Disney, 6x recommended, 14% of portfolio
  • Priceline, 4x recommended, 8%
  • Amazon, 2x recommended, 6% of portfolio.
  • Activision, 4x rec, 5% of portfolio.

Next in line would be 3x rec Nvidia with 3%. One could argue that the exposure to Netflix is too high but we are nowhere near 60% in one stock.

I believe David’s strategy is to let winners run and even add from time to time. As a result you get a portfolio composition as above. So far it has served him (and us) well. I won’t argue with success but enjoy the returns instead.

LNS

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Jeepers! You would think we were talking Trump vs. Clinton with how personal this all got. Crimeny! – Tinker

PLEASE!!! Let’s NOT go there! LOL

Let your winners run, no matter how large a portion of the port it becomes, until it is time to sell them (that is another thread and I have specified those conditions many times on other threads here, and on other boards).

Yep! Fear of success is a tremendous limiter in wealth creation.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

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