Size does matter...
...at least in portfolio construction
Does size matter or not? It’s a loaded question in various contexts, but in portfolio construction I’m sure that it does! As mentioned in my previous post, I decided to reduce the number of positions in my portfolio to make my bets count. I don’t want to be distracted with a 1% position in my 20th best idea, what use is that? Especially for somebody like myself with other assets outside of stocks providing diversification.
Investing is hard, so if we find a winner we want to feel reap the benefits. I have set up the following steps to get closer to my goal throughout the year:
Reduce the number of positions between 10-15 companies.
Increase positions <3% to at least 3% or sell them.
Sort portfolio companies into three buckets (outstanding, great, good quality).
Be more strict on good and great quality companies regarding overvaluation and bad business results.
Opportunistically buy larger positions in high IRR positions.
Be okay with trimming great and good quality companies if they run up in price, especially after an overweight position was taking during cheap valuations.
I’ve been very active this week
As you saw with a number of buy and sell posts, I’ve been quite active this week buying and selling companies to get towards my goal. Let’s take a look at my quality buckets, transactions and current portfolio.