More On Portfolio Size

I already talked a bit here about how big a portfolio should be. There is no single answer, it depends on each ones investing philosophy. Buffett has hundreds of mini positions he uses basically to get their reports by mail and follow them. I have not reached that extreme though :).

As for my case and as of now I basically do not want to concentrate more than what I already have on my main positions. I think for example that Dell, given its price and risk has now a reasonable size on my portfolio, but who knows, I might add more. I don’t usually plan what to buy. Mostly I act opportunistically. If a stock keeps dropping and the prospects as I evaluate its company seem good then adding at lower prices makes even more sense

The thing I do on a constant basis is study what I have, it’s competitors, and what I would like to have. Like that I am prepared to buy when the chance comes. It’s a bit like a hunter or a sniper waiting patiently to pull the trigger and getting informed in the meantime. For example I have been studying Intel and Western Union because they seem to be close to a price level that might make sense to buy. Only studying them can I be sure.

In this post about portfolio performance evaluation I explain a bit how I ended up with what I have and the diversification level I reached.

Most of what I have is concentrated on around 15 companies. I also have small positions that I do not see a reason to sell yet. Some are small positions that at the moment I bought them I thought they could be increased in size. But I did not do it for all (like Harley Divison, Amgen, US Bankcorp) due to other opportunities that came along. Many big positions I have started as small investments (like Dell, WFC, Berkshire).

Also some small positions are there because they fell (like ERF, PDS, CLP, XHB, Geox) and I find them too cheap to sell. I also do not increase them because of other options.

In my case I’d like to have a smaller amount of companies but I just do not see the opportunity to sell the stocks I have yet. I also still have enough cash to deploy. Nonetheless I constantly monitor what could be sold or reduced. I recently sold American Express and AV Homes. Both were small positions that were taking too much time to keep up with. I am also reassessing GE and JNJ and WMT, in order to see if I should reduce them or not.

I normally revalue on a constant basis, specially the companies that are under bigger risk or who have the biggest potential. If the company when I revalue it is under its fair price I keep it. Even if it fell a lot since the time I bought.

For example Geox is my biggest loss. But I keep it because every time I reassess it it still feels to me that its quite under its fair price. I might even add more like I did with USG when it fell more than 70%.

In another case I sold AMD at a loss because not only did it fell in price but it also lost its value.

I generally just sell if the company has deteriorated and lost its earnings power. Or if I have a much better investing opportunity and need the cash for it. Or if I have too many companies and I cannot follow them properly. Then I sell because the risk of losing due to the lack of knowledge can be quite a problem.

It comes down to how I look at my investments today.
When I revalue the company I ask myself: Is the investment still sound ? If the answer is no, no matter how much I am making or losing I should get rid of it. The point is that companies have no idea of the price you bought them. The price at which I bought in the past has no influence on how sound the company is doing today.

I find it illogical when people plan and say something like: I will sell when I make 40%. I rather reassess constantly. Companies are changing all the time. Maybe after a price increase a company still is cheap because the intrinsic value went up in the meantime.


About jrv

I was born in Spain and lived in Belgium, Chile, France, USA, Argentina among other places. Currently I am trying to settle down in a wild place. I am "retired", even though now I dedicate more hours "working" for my investments than I ever worked in the real labor market where I used to work in IT and Banking. I am a family man, I have a lovely wife, several sons and one step daughter. I have humble tastes, I like to stay home and read about companies and investments. I started investing at 25 before the internet bubble exploded. I did not know much about investing and liked technical analysis so my results were pretty bad. Fortunately I did not have much to lose. Some years later in 2006 bored of doing only real state investments and with quite a lot of money saved I opened an account in a cheap and excellent online broker and started again. This time I did not want to commit the same mistake, so I decided to follow a model. I heard that Warren Buffett was the best at making money via stocks so I started by reading a lot about him, all of his shareholders letters and several of the books that he recommended. I learned a lot, started applying his investing principles and reading a lot of 10K's. Digested news from lots of different sources. Basically I started buying very good and cheap companies and holding them for ever if possible and if nothing changed fundamentally. When the housing crisis started I was more than 75% cash. At that time I identified good companies at incredibly cheap prices so I invested most of my savings in stocks. In less than I year I doubled. By the second semester of 2009 I turned my software company into an investment vehicle and dedicated myself full time to it. My wife and I decided to change our lifestyle and moved from Belgium to the beach in a wild country. The goal was to keep fixed costs low in order to be able to live with a minimum 6-8% yearly return but specially to move away from the inhuman life of civilization and to have finally some peace and sunny weather to concentrate better on investing. Now I can think and study about companies 60 hours a week and I am doing great. I can finally do what I want full time and can proudly say that I have never been so happy, specially also with my just born 4th son, my other great kids and my sweet wife who supports me fully while I study most of the day and patiently wait for the opportunity to make a swing ! You can learn a bit more about my portfolio by viewing it at or you may learn more about me and my family by following the link "Author's site" from the menu above.
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