Comments on: Concentration vs. Diversification http://www.contrarianvalueinvesting.com/2008/09/25/concentration-vs-diversification/ Contrarian Value Investing At Its Finest Wed, 03 Feb 2010 03:24:06 -0600 http://wordpress.org/?v=2.8.6 hourly 1 By: KyleM http://www.contrarianvalueinvesting.com/2008/09/25/concentration-vs-diversification/comment-page-1/#comment-1976 KyleM Fri, 26 Sep 2008 22:28:14 +0000 http://www.contrarianvalueinvesting.com/?p=133#comment-1976 You must understand though, when it comes to characters such as Warren Buffett, people are quick to point fingers to the ripple effects of his decisions and the fact that he can create special deals because of his large capital base. That being said, we all knew that he was building up and maintaining liquidity in his portfolio because like any good value investor, he saw that the market was well overpriced (Read The Rediscovered Benjamin Graham: Selected Writings of the Wall Street Legend. Especially the section where he testifies to congress and his valuation of the market at the time). He wasn't chasing returns like so many other managers that we continually see fail. Through it all though, we must remember that these gentlemen that are legends and are followed by many, started out like us - very common. It was a solid foundation under a solid investing principle that allowed them to make a majority of good decisions and the ability to recognize their bad ones. I refuse to relate the isolated instances where these gentleman obtained good deals as a matter of luck, or bullying with capital and not the effect of years of quality decisions that put them in a solid position. You must understand though, when it comes to characters such as Warren Buffett, people are quick to point fingers to the ripple effects of his decisions and the fact that he can create special deals because of his large capital base.

That being said, we all knew that he was building up and maintaining liquidity in his portfolio because like any good value investor, he saw that the market was well overpriced (Read The Rediscovered Benjamin Graham: Selected Writings of the Wall Street Legend. Especially the section where he testifies to congress and his valuation of the market at the time). He wasn’t chasing returns like so many other managers that we continually see fail.

Through it all though, we must remember that these gentlemen that are legends and are followed by many, started out like us – very common. It was a solid foundation under a solid investing principle that allowed them to make a majority of good decisions and the ability to recognize their bad ones. I refuse to relate the isolated instances where these gentleman obtained good deals as a matter of luck, or bullying with capital and not the effect of years of quality decisions that put them in a solid position.

]]> By: alexg http://www.contrarianvalueinvesting.com/2008/09/25/concentration-vs-diversification/comment-page-1/#comment-1948 alexg Fri, 26 Sep 2008 01:43:07 +0000 http://www.contrarianvalueinvesting.com/?p=133#comment-1948 T.J: I could not have said it better D4L: Great to see you have allocation "system" , mind sharing? T.J: I could not have said it better

D4L: Great to see you have allocation “system” , mind sharing?

]]> By: Thomas Johnson http://www.contrarianvalueinvesting.com/2008/09/25/concentration-vs-diversification/comment-page-1/#comment-1945 Thomas Johnson Thu, 25 Sep 2008 23:05:00 +0000 http://www.contrarianvalueinvesting.com/?p=133#comment-1945 That should read, "A common trait among value investors who outperform the market by wide margins is they have superior knowledge of the risk/return profiles compared to the rest of the market, or they have access to investment opportunities that the rest of the market does not (e.g., Buffett & Goldman)." This naturally leads to concentrated bets being preferred to diversification. That should read, “A common trait among value investors who outperform the market by wide margins is they have superior knowledge of the risk/return profiles compared to the rest of the market, or they have access to investment opportunities that the rest of the market does not (e.g., Buffett & Goldman).” This naturally leads to concentrated bets being preferred to diversification.

]]> By: Dividends4Life http://www.contrarianvalueinvesting.com/2008/09/25/concentration-vs-diversification/comment-page-1/#comment-1943 Dividends4Life Thu, 25 Sep 2008 22:24:37 +0000 http://www.contrarianvalueinvesting.com/?p=133#comment-1943 Very well written. I tend to concentrate while a stock is cheap, but I have an overall allocation I work within. Best Wishes, D4L Very well written. I tend to concentrate while a stock is cheap, but I have an overall allocation I work within.

Best Wishes,
D4L

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