The art and science of concentrated investing

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Livewire Markets

With ten stocks comprising up to 75% of the portfolio, Adrian Warner from Avenir Capital is well versed in concentrated investing. He outlines his strategy here, using a stock example that has more than doubled, and that he thinks could have 70% further upside.

 

Key points:

  • Crittenden & Wilcox’s report from 2008, ‘The Capitalism Distribution: Observations of individual common stock returns, 1983 – 2006’: demonstrated that 25% of the stocks in the sample period were responsible for ALL the gains of the market.
  • Charlie Munger quoted as saying: “The idea that it is hard to find good investments, so concentrate in a few, seems an obvious idea. But 98% of the world does not think this way”
  • Avenir’s philosophy is to select predictable, understandable companies with multiple ways of winning; Allocate capital to the best ideas, with low risk of capital loss, growing underlying value; and let the market provide opportunity, rather than dictate your actions.  
  • Illustrates this with a company example Avenir bought at $4 but they thought was worth $7, which has reached $10, but not before first drifting down by 30% over 2 years. Adrian thinks there is another 70% upside ahead in the stock.

Find out more

Avenir Capital is an Australian based investment manager, specialising in value-oriented global equity investments. Watch their Fund in Focus here


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