Saul,
I think you will find this discussion comes up quite a bit in both the SA and RB boards. The primary request tends to be to adjust the reporting/marketing that is done to reflect percentage gains across different time periods versus just the recommendations as a whole from the beginning. I certainly see value in that myself, but as you, Huddaman, and many others have done, the numbers are all public for SA subscribers to do the math themselves and see where the majority of the gains are coming from. This can also be done with your portfolio as well as you have been quite generous to share that with us on your board. But it certainly complicates things when you are a company selling services and presenting the numbers in the most positive light for marketing purposes comes into play.
I definitely agree with you that it seems unrealistic that an individual would let DIS alone become such a large percentage of their portfolio. I think the point behind the article and the math is that they would be better off if they did even though the risk would be off the charts. The same might be true with your stocks as well if you could stomach the risk over that long a period of time. I for one could not and would tend to trim by best along the way to “adjust my risk”, but is that right? I think so because it lets me sleep at night, but sometimes it does feel like you have to limit your own performance to adjust away from concentration risk.
Your portfolio is a great example I think. You are more concentrated than many others since you have great confidence in your ability to analyze companies. And you are sharing that here with us on your board. But I would guess that early in your investing career, you were not as confident while you were building your knowledge and diversified much more to lower your risk. I think I have read you have adjusted the number of companies down in your own portfolio over the years down to what you have now as your experience has grown. I want to get there myself, but it feels like that is a progression. I started with just index funds and eased into individual stocks. I am diversified broadly right now creating my own “index fund” from the TMF universe, but that is not likely to perform as well as your more concentrated and well researched portfolio. Over time I will gain more confidence about how to better analyze companies and greater concentration will occur.
But getting back to the original point. SA and RB are idea services first and foremost. Not portfolios. The marketing certainly hints that they are portfolios in some way, but people can do very well or very poorly based on their own choices from the SA/RB ideas. TMF could absolutely do better I think with decision making on when to sell and how long to hold ideas that are not panning out, but I do like that they track their ideas for a long period of time as you can learn quite a bit from their mistakes as well.
Thank you for asking these questions and presenting your views on portfolio management as well. Very helpful board and discussion.
Tom
Tom