Concentrated Investing: Strategies of the World's Greatest Concentrated Value Investors

Observing correctly that the market was frequently efficient, [academics, investment professionals, and corporate managers] went on to conclude incorrectly that it was always efficient. The difference between these propositions is night and day.

In the idealized model, the portfolio manager has an accurate probability distribution on the future performance of each asset in the universe of potential investments. Kelly’s methodology then provides a quantitative specification of how big a position to take in each of the candidate assets. Not surprisingly, the fraction of one’s portfolio to be

Greenberg tries to simplify the financials, reports, and presentations down to a thesis.51 Is this an advantaged business? How much competition does it have? Can it raise prices? And is it priced at a level where you could see making a very attractive rate of return without much risk of loss? The first thing we decide is whether it’s a good busines

The key to Shannon’s Demon is the constant rebalancing of two more uncorrelated assets. (Correlated assets move together, uncorrelated assets do not move together.) The rebalancing forces the investor to buy stock at the low, and sell at the high. Investors who dollar- cost average into a position are taking advantage of this phenomenon.

GEICO’s portfolio under Simpson was notable for its low turnover relative to that of its competitors.161 He says that he has done very well when fully invested, found a new idea, and then sold out of the idea that he had the least confidence in to replace it with the new idea.162 He argues that, once the portfolio is fully invested, one, two, or th

Nobody’s ever heard of him because he handled private money and he didn’t get written up in books or get quoted in the newspapers, but he was a really phenomenal investor. The story was that one of the Gottesman family members came into his office one day and said, “Arthur, what’s the secret to your success?” Ross said, “Tennis shoes. Now get out o

Greenberg doesn’t limit himself to one kind of valuation metric, but he always looks at free cash flow yield.

If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. If it’s your game, diversification doesn’t make sense. It’s crazy to put money in your twentieth choice rather than your first choice. . . . [Berkshire vice-chairman] Charlie [Mu

He doesn’t search for investments in analyst reports, or by speaking to sell-side researchers. “People on Wall Street tend to be very articulate, highly educated and intelligent, and can be very persuasive,” he says. “It’s best to just stay away.”