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« Finding Value | Main | Larry Sarbit »

October 25, 2006

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John,

Is there a reason why you want to have 25 stocks in your portfolio? Joel Greenblatt has written in both his books that a portfolio of eight stocks in different industries can eliminate almost all of your non-market risk and that if you've done a lot of research and know the companies in which you've invested inside and out (which you obviously do), adding additional companies doesn't really help you diversify any better. Furthermore, knowing 25 companies well takes longer than knowing 15 companies well and wouldn't the extra time spent finding, say, 10 additional investments be better spent increasing the understanding of those top 15 investments?

Alex: I see it as personal comfort level. And for me that's 20-25 positions. I could perhaps go as high as 30, but don't think I'd be able to keep up with more than that.

Buffett wrote in his "Superinvestors of Graham-and-Doddsville" that some value managers held hundreds of stocks, others concentrated among a few.

Seth Klarman said you could hold 10 to 15 stocks. The guys at Tweedy Browne own 100 or so. Longleaf Partners Fund owns 20 stocks when it's fully invested. I don't think there's any magic number. For me, I feel comfortable with 20-25. :-)

"My plan is to be writing more pieces like How to Research Foreign Stocks and How to Buy Stocks Listed on Foreign Exchanges. Not all about international investing, of course, but more original pieces."

John,

These are my favorite posts as well. I look forward to seeing more of this type of thing on your blog. I'm sure the response will be very positive.

Geoff: I appreciate that and thanks. Now if I can just find the time! ;-)

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