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I’m actually surprised the holdings are so few in number of items. I’d expect more small bets

basementcat 2y ago
My understanding is Warren Buffett prefers a small number of large concentrated positions (the details of each position has presumably been carefully studied by him or Berkshire staff) over a large number of more modest positions (for that, you can just buy an index fund).
- TheAlchemist 2y ago
  Exactly. Warren & Charlie said for years, that diversification is good for average investor, but if you do have some special insights into an investment area, you should bet heavily if the right opportunity appears. To quote Charlie Munger: "The idea of diversification makes sense to a point - if you don't know what you're doing"
bdjsiqoocwk 2y ago
Buying a lot of things is what you do when you don't know what you're doing. If you can identify which stuff is the good stuff, why buy the bad stuff?
- seanhunter 2y ago
  Like lots of Buffett and Munger's folksy takes on investing that sounds like it makes sense but actually deserves some scrutiny. Clearly in some sort of idealized market if you have infinite risk tolerance and you are really certain you would put all your money into your best idea and that will give the best return. In real markets investment ideas/trades/strategies have a finite capacity which is the amount of capital you can deploy before the opportunity shuts down (if nothing else because of the distortive effect of the money you have already put into it). So normally investors are forced to diversify once they have a certain amount of capital simply because it's the only way they can get their captial into play and earning some sort of return. Berkshire choose not to do it which is why they have such a massive amount in cash sitting around doing nothing. So it's not like their idea is wrong as such it's just that they aren't 100% upfront about the downside of their way of doing things - they can only take really massive trades. There are only so many of those which limits the quality of opportunities they have, and even there they can't deploy all their capital so their rate of return suffers because they have a lot of cash on the sidelines. That's at least partly why their returns (although excellent on an absolute basis) are so much lower now than they were in the 80s for example - they are too big now and they can't get all their capital to work.
  - bdjsiqoocwk 2y ago
    So what? I'd rather have cash in the bank and have a lower rate of return, than putting it into equities I'm not so sure about...

My understanding is Warren Buffett prefers a small number of large concentrated positions (the details of each position has presumably been carefully studied by him or Berkshire staff) over a large number of more modest positions (for that, you can just buy an index fund).

TheAlchemist 2y ago
Exactly. Warren & Charlie said for years, that diversification is good for average investor, but if you do have some special insights into an investment area, you should bet heavily if the right opportunity appears. To quote Charlie Munger: "The idea of diversification makes sense to a point - if you don't know what you're doing"

bdjsiqoocwk 2y ago

Buying a lot of things is what you do when you don't know what you're doing. If you can identify which stuff is the good stuff, why buy the bad stuff?

seanhunter 2y ago
Like lots of Buffett and Munger's folksy takes on investing that sounds like it makes sense but actually deserves some scrutiny. Clearly in some sort of idealized market if you have infinite risk tolerance and you are really certain you would put all your money into your best idea and that will give the best return. In real markets investment ideas/trades/strategies have a finite capacity which is the amount of capital you can deploy before the opportunity shuts down (if nothing else because of the distortive effect of the money you have already put into it). So normally investors are forced to diversify once they have a certain amount of capital simply because it's the only way they can get their captial into play and earning some sort of return. Berkshire choose not to do it which is why they have such a massive amount in cash sitting around doing nothing. So it's not like their idea is wrong as such it's just that they aren't 100% upfront about the downside of their way of doing things - they can only take really massive trades. There are only so many of those which limits the quality of opportunities they have, and even there they can't deploy all their capital so their rate of return suffers because they have a lot of cash on the sidelines. That's at least partly why their returns (although excellent on an absolute basis) are so much lower now than they were in the 80s for example - they are too big now and they can't get all their capital to work.
- bdjsiqoocwk 2y ago
  So what? I'd rather have cash in the bank and have a lower rate of return, than putting it into equities I'm not so sure about...