Concentrated portfolio: why many well-known investors hold few stocks
A portfolio with few large positions. The mark of concentrated managers: when they are right it shows; when they are wrong, too.
How it is measured
By how much the top 10 positions weigh. At Berkshire or Pershing Square they exceed 80%; in the S&P 500, a little over a third.
Why it matters when following a manager
In a concentrated portfolio every buy is a strong decision. In one with thousands of stocks (Citadel, Renaissance), single positions say very little. That is why we count concentrated managers separately (portfolios of 5 to 100 stocks) and leave out quants and banks, among others.
Frequently asked questions
Is concentrating riskier?
It widens the gap with the index, for better or worse. That is why each manager's track record matters.