08-08-2015, 10:54 AM
I was reading Warren Buffet and the Art of Focus Investing on Seeking Alpha and ran across a comment from Buyandhold 2012. He stated "There are 36 stocks in my portfolio, but 50% of the money is in the top 5 stocks. 18% of the money is in the top stock."
BH is well known for never selling a stock. I will sell a stock which is grossly overvalued; however, it does beg the question of whether a position which has become very large due to fundamental growth should be sold.
From a strictly risk aspect, a large position can have an oversized impact if something goes wrong. From a dividend growth aspect, a large part of the growth (and presumably dividend growth) has occurred due to only a few of the stocks in which he has invested (5 out of 36). Should we sell our winners?
I think the answer is whether you consider the growth will continue. As always, timing is a problem. My inclination is not to invest new money into the winner, but let the winners ride while continuing the normal monitoring of fundamentals. A company that is doing well is less a risk than one which is struggling.
BH is well known for never selling a stock. I will sell a stock which is grossly overvalued; however, it does beg the question of whether a position which has become very large due to fundamental growth should be sold.
From a strictly risk aspect, a large position can have an oversized impact if something goes wrong. From a dividend growth aspect, a large part of the growth (and presumably dividend growth) has occurred due to only a few of the stocks in which he has invested (5 out of 36). Should we sell our winners?
I think the answer is whether you consider the growth will continue. As always, timing is a problem. My inclination is not to invest new money into the winner, but let the winners ride while continuing the normal monitoring of fundamentals. A company that is doing well is less a risk than one which is struggling.