Greetings from the Coliseum, Warriors!
For those of us who have been asleep, incarcerated or have passed on to the Fires, I bring news: All the hungry lions
have been loosed at once and are on the attack! All here are awash in Blood!
Oh, but first, this is important …
“I Wish I knew then what I know now.” It’s especially true for each of us late-life investors, right? We could easily be rich
and sailing through life by now. I mean, assuming that scenario trips anyone’s trigger, of course. (It doesn’t exactly turn
me off.) But the wishing part I always considered as wasted energy.
After years of me prodding him to learn investing, to no avail whatsoever, I finally satisfied my desire by realizing my son
was doing just what he should be doing. Here was this grad student, broke like many a student, living with friends in
total harmony and poverty in equal measure, and as happy as anyone I know. Who was I to prod his interest in a
direction of my choosing? Finishing his Master’s and planning his strategy for his PhD was surely at least as important as
my desire for him to learn to invest. Okay, you’re right. Probably more so.
Then, out of the blue One & Only Son came to me a couple of weeks ago. “Dad, remember how you used to try to
convince me to learn about investing? It’s time, I need to learn some basics.”
“Basics, hell, Son! Let’s CONQUER, dude! We shall RULE!”
< Ahem > Sorry, I got carried away there. I was so tempted to ask “Why now, for heaven’s sake?” but caught myself in
time to reign in that question forever, thank my lucky stars and take Mr. Lennon’s advice. Yes, that’s the one. Let It Be,
Let It Be.
(and later, alone, in private, rejoice!)
Ok, back to the lions it is.
Things I’ve Learned. < sigh > Again
• Time is precious. Duh. My ToDo List is growing faster than my companies. I can’t spare the time to follow
more than 10 companies and that’s pushing it. If you can, my hat’s off to you. But for myself, I need to narrow
down my focus more. I’m not eager to have a big chunk of my funds disappear in some calamity, and I
understand popular theories on diversification. But I have heard hear there is life beyond investing and
I’m eager to find out. In fact, I hear it calling now, plus I have 3 years of taxes to punch out and file.
• Conviction is paramount. I find over and over that the correlation between my level of conviction in an
investment and results are very high. More conviction makes it easier to follow my company over large hills and
down steep valleys with less concern about threats real or imagined. Whatever the cost of low-conviction
stocks, if I buy one in spite of my low conviction, the real price is the cost plus commissions—Buy and Sell—
because chances are that it will be sold sooner than later.
• Not everything can be calculated. There have been studies upon studies of investor behavior and
results but some of the real determining factors aren’t ever studied as far as I know. For example, what about
luck? You can’t say that luck isn’t part of investing, can you? And I’m putting conviction in the same category of
unstudied, hard-to-define factors that influence investing outcome. For me it’s right up there with an
abundance of company information and life experiences.
• Managing a super concentrated portfolio strategy requires unique focus and strategies. It is much
different than, for example, buying every idea under the sun that someone recommended (ha, like I would
know) and hoping some go up. It requires intense focus and unwavering attention. But the returns, financial
and otherwise, can be very rewarding. For me, February 2018 just hasn’t been proof, but my conviction of its
truth remains. Certainly, low returns are not a problem that can’t be dealt with. They just aren’t to be repeated.
• Every investment should be made with the idea that this investing opportunity is the best I have found
within the 10,000 alternatives available to me. This doesn’t mean I never buy when I’m somewhat unsure of a
company’s future value. In fact, no matter the information at hand upon purchase, I consider my knowledge of any new
investment to be the same as my experience with it—usually low unless I’ve used the product or service, or invested in
the equity previously—until time following the company and management reaction to certain events lend clearer
perspective. A new-to-me investment can start out with a conviction of say, 2 through 4, maybe 5 max, to begin with,
and rise or fall thereafter as experience directs. What it does mean is that if I’m not convinced a new idea is the very
best I can find after making a reasonable investigative effort, I need to study that opportunity deeper or move on to
other opportunities before buying.
• The … Bullpen? I always attempt to have completed research on new opportunities. “Watchlist” comes to
mind, but doesn’t really describe my intention. Maybe “Bullpen” would work since we’re all addicted to
sports analogies. But it sounds stupid. Whatever you call it, I would like to have one or more pre-
vetted investments studied, approved,
packed and virtually ready to go assuming a last-minute adjustment for a price update doesn’t materially change
my perception of value. The market can throw surprises at any investment at any time and these changes can occasionally
have a legitimate effect on the long-term future value of an investment. I prefer to be ready to play on short notice.
• The “Buy a Dozen and Hope Some Win” port management concept works great–for brokers. For
investors it produces average gains at best and then only with considerable good fortune.
• Investing is too hard to settle for average.
• I’m too old to settle for average.
. leads to
I believe a highly-focused approach offers the best risk/reward ratio to investing less than say, $5m
. And since
• I’ll never have to worry about the size limit
• A Highly Focused approach requires consistent tracking and follow-up
• 8-10 holdings allow in-depth learning of each
• I think 6-8 would be my ideal number, allowing time for other interests and needs
. So after a mere 273,000 years of evolving, I’ve ended up here:
My Ideal Port
would be highly focused and would probably look something very much like this:
**Company Size** . Conviction 10.0, Unlimited 25.0% . Conviction 9.75, Inc. 20.0% . Conviction 9.50, Inc. 17.5% . Conviction 9.25, Inc. 15.0% . Conviction 9.0a, Inc. 12.0% . Conviction 9.0b, Inc. 4.0% . Best New Idea-1, Inc. 1.5% . Best New Idea-2, Inc. 1.5% . Cash (Still has value) 3.5% **Total Capital 100.0%**
So … What’s in your wallet?
… I mean, your mind?
… no, I mean, your portfolio?
… All of the above.
Comments and Criticism welcome. Really. And now, duty and Taxes await, so I’ll be gone awhile. Please
don’t rile up Mr. Market while I’m away. Evidently I’m already on his S*List. And Have a great weekend,
Lions, what lions? Oh, yeah, those lions. Well, I’ll save time filling in details and just tell you that
I saw it on Fox News just 30 minutes ago. They’re trying to confirm now. I wouldn’t wor…