Concentrated Investing

Concentrating investments in 8-12 stocks provides the following benefits:

• Magnified impact of superior stock selection -- The best investment ideas are not diluted by weaker ones.
• The largest benefits of diversification are captured -- the first 10 stocks in a portfolio reduce volatility to the greatest degree (See graph below). Additional stocks reduce volatility to a lesser extent while diluting the impact of stock selection.
• Better coverage of portfolio holdings -- holding fewer stocks allows the portfolio management team to focus more intensively on existing and potential portfolio holdings.