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The Concentrated Portfolio, June Update

Jul. 13, 2017 1:10 PM ETCELG, MSFT, PYPL, UN, AMZN9 Comments
Iron Value profile picture
Iron Value


  • The Concentrated Portfolio is up nearly 23% in 6 months.
  • The S&P 500 Index is up 7.5%.
  • Bet your beliefs!

Alpha can ultimately only be found by picking more “winning” stocks than "losing" stocks in your portfolio. By winning stocks, I mean those stocks which go up by 20%+ in a year. We all have them in our portfolios. The problem is that most of our portfolios contain 20+ stocks and we tend to end up with a mix of losers and winners that are evenly spread. The result of this stock picking methodology is that you end with no alpha and you may as well invest in ETFs.

What’s the point in saying you are a shareholder of Amazon (AMZN) if it only represents a tiny 1% portion of your portfolio? Feel free to pat yourself on the back for your investment acumen but in real terms the net impact on your net worth is negligible.

Investment success is not just based on picking winners; it is also fundamentally rooted in how much you risk on picking winners. Oftentimes, I think many dismiss this iron law of investing. Conviction is fundamentally important to investment success.

"Long AMZN" is a near meaningless statement. "Long AMZN 10%" says so much more.

To my mind, it is far easier to have a “winning” portfolio if it consists of just a handful of stocks because you are forced to think deeply about your stock selection.

"Portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort level he/she must feel with its economic characteristics."

– Warren Buffett, CEO, Berkshire Hathaway

To that end, the Concentrated Portfolio consists of just 5 stocks. Market beating alpha is sought via high conviction selections on a small pool of winners. The Concentrated Portfolio is really an attempt to try and make sure that I

This article was written by

Iron Value profile picture

Analyst’s Disclosure: I am/we are long CELG, AMZN, UN, PYPL, RHT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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