User question: I’m curious the logic behind the 17-18% of portfolio on any individual stock. Why not 25% or 10%?
Victor: Good question. I used to own 25 – 30 companies. I realized that I could not possibly understand or track all of them sufficiently. I dropped the number to 20 about 12 years ago, later down to 15, and in the last four years down to 10-12 companies. I focus on these 10 companies, understand what they do, follow their news stories daily, listen to their quarterly earnings calls, set up a spreadsheet to track their metrics, growth, etc. I have about 15 metrics and 15 criteria. I then rank them 1 to 10, make certain they fall within my parameters, and allocate larger percentages to those that are ranked higher. I try not to exceed 17-18% at any given time. A company at 10% allocation that doubles or triples quickly could end up 15-20% allocation. No science behind it, but definitely allocate more to the companies I have stronger conviction in and less to those I’m exploring or trying on for size. Part of it is the rules and parameters I’ve set for myself. Hope this helps.
User comment: Definitely helpful. 10 companies are much easier to follow than 15-20. Thanks for the explanation.
Victor: Not to sound like the eternal optimist…unfortunately it can’t be green every day. It’s days like today that I look back and remember how many “up” days we have had in the past two weeks that have put us 20% higher! And also days like this that I consider whether I want to add to any of my positions. 🤔.
Quick update: Today was a mixed day in my portfolio resulting in it being almost unchanged. That said, ZS was up almost 5%, While TTD was down 5%. As stated a few months ago, I went ahead and sold my remaining NTNX position this morning after holding that name for over 20 months. Quite simply, I think they will recover, but have 6 to9 months of rebuilding to do. I used the proceeds and 75% gains to add to my AYX position. I also made the difficult and emotional choice to sell my remaining position in NKTR, a CAR-T play. It has been my one outlier stock for a few years that I made incredible gains early on and sold half my position over $100, but I’m not willing to wait any longer for clinical trial results, and this is the one stock in my portfolio that has no revenues or significant growth yet. It was a pure speculative play on gene therapy. This leaves me with only 8 stocks and looking for a couple to make 10. I will revisit GH, SHOP, SPLK and PLAN to see how they are shaping up.
