March-31-200
Last week we discussed the numbers of stocks held in Gurus’ portfolios. Our users think that the weightings of top holdings are a better measure of the concentration of Gurus’ portfolios. This is our study.The table below shows the portfolio overview of the Gurus. The numbers there only include the contributions from stocks. The positions in preferred stocks and options held in some Gurus’ portfolios are not included.
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We can see that among the 53 Gurus we track, 5 gurus own less than 10 stocks in their portfolios. 15 have more than 50% of portfolios in their top 5 holdings, 28 have more than 50% of investment in top 10 holdings.
Warren Buffett, who owns 40 stocks in Berkshire’s $68 billion equity portfolio, has 60% of his investment in his top 5 holdings, more than 82% in top 10 holdings. This is what Charlie Munger said: "Our investment style has been given a name - focus investing - which implies ten holdings, not one hundred or four hundred. The idea that it is hard to find good investments, so concentrate in a few, seems to me to be an obvious idea. But 98% of the investment world does not think this way. It's been good for us."
Mohnish Pabrai likes to have 10 positions equal weighted. Currently he has 13 stocks, with 99.6% of the weighting in top 10.
Joel Greenblatt thinks that focus and concentration are the only ways to beat the market. He owns only two stocks as of last quarter. He does have some option positions which are not included in our list.
Gurus like John Keeley and David Dreman run small cap mutual funds. With multi billions under management, it is hard for them to concentrate their investments. But they both have achieved outstanding track record. The numbers of stocks they own are impossible for small investors to work with.
Concentration vs diversify, which way do you want to go?
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