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It almost feels like a sin.

The one stock portfolio.
What about diversification?

But if you think about it, most of the world’s wealthiest people put all of their eggs into one basket – their business.

Why is investing in a stock portfolio so different?

We’re told to “diversify, diversify, and diversify some more” to protect ourselves. But is it the right thing to do?

A diverse portfolio might make you comfortable in 30 years’ time, but it won’t make you rich and it certainly won’t change your life.

After 18 years of playing this game, the thought of a more concentrated portfolio has become increasingly alluring (albeit still a bit sinful) to me. So not necessarily a one stock portfolio from the get-go, but if I play my cards right and make a bold bet – the right positioning early on and capital appreciation over time might make it a 80%-in-one-stock portfolio.

Concentration = conviction.

Buffett and Munger tell us to carry around a symbolic ‘punch card’ and that before we invest in a stock – remember that there’s only so many punches in that card available to us during our lifetimes.

It’s to help us tame our insatiable desire to constantly buy more stocks, diluting the future returns in our portfolio.

That seems to have worked out pretty well for them.

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I recently read the book, Richer, Wiser, Happier by William Green and in it Green writes about Nick Sleep of the now closed Nomad Investment Partnership. Sleep was quite the magician because he magically turned $1 into $10. The Partnership returned 921.1% over 13 years. Here’s the kicker – those results were mostly driven by only 3 stocks – Amazon, Costco, and Berkshire Hathaway. After closing the fund in 2014, Sleep just took his portion of those three stocks with him to form his personal portfolio.

Others have concentrated too (some even unintentionally):

Philip Fisher, one of Warren Buffett’s early idols and author of one of my favourite books of all time – Common Stocks and Uncommon Profits – credited most of his investment success and personal wealth to one stock; Motorola. Fisher said: “if you are in the right companies, the potential rise can be so enormous that everything else is secondary. Every $1,000 I and my clients put into Motorola in 1957 is now worth $1,993,846 — after all the ups and downs of the stock and of the market.” Fisher smartly first bought Motorola stock in 1955 and courageously held on until his death in 2004.

Benjamin Graham, who taught Buffett at Columbia Business School ironically made most of his life-changing wealth in a growth stock, not a value stock – the latter of which he based his entire educational and professional career. That stock? Geico. Graham said: “the aggregate of profits accruing from this single investment decision [Geico] far exceeded the sum of all the others realized through 20 years of wide-ranging operations in the partners’ specialized fields, involving much investigation, endless pondering, and countless individual decisions.” In 1948, 12 years after GEICO’s founding, Graham’s firm (Graham-Newman Corp.) bought 50% of GEICO for $712,000. By 1972, the value of that investment had grown to $400 million.

Rakesh Jhunjhunwala, who recently passed away, attributed the vast amount of his wealth to the Titan Company. This Tata group business rose from around ₹3 (during the time Rakesh first built a position in 2002) to ₹3000 where it currently trades at now. Yes, you read that right; a 1,000x return. At the time of his death, the Rakesh estate held 44,850,970 Titan Company shares, around ~5% of their total public float. When asked in 2010 by a reporter from The Economic Times if he would ever sell any shares, Rakesh said: “I will sell Titan one day, but I do not know when. I have a dream. I will sell my share for a billion dollars, otherwise I would not hold on to the stock.” Amazingly Rakesh never sold out of his position in Titan even through all of the market turbulence. Today that position is worth around $1.6B USD. Now that’s vision + conviction!

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