MMM has an individual AA, JL Collins has his own, there is the PP, and there are many more.....are they all artificial?
Yes, clearly.
So do you view them as foolish?
No, I don't view them as foolish, or I would have described them as foolish. I said they're artificial. That's what I've been getting at since the beginning -- you have ten arbitrary, synthetic categories and membership in the categories is extremely important for the 'appropriate' amount of the company to hold according to the strategy. But there's no reason there aren't nine sectors, or eleven, or fifteen, and not all the sectors are equally important to our economy, as evidenced by their market capitalizations, profits, revenues, number of employees, and countless other metrics. Frisch's just is not as big a company and Proctor and Gamble, even if they both sponsor the symphony!
If your classification scheme is not intrinsic to the market you're studying -- and it should be clear that it's not, since companies can border between two sectors, acquire companies in other sectors, and change their business models -- then why should it outperform any other arbitrary classification scheme, unless you happen to overweight the sectors that outperform going forward and underweight the others?
If I start a mutual fund that only invests in companies whose names start with M, and then the companies whose names start with M outperform the others over the next year, that doesn't mean that the alphabet has deep powers of investment prediction. If I buy a mutual fund with only 40% the financials and three times the utilities, and then utilities outperform, that doesn't demonstrate the virtue of holding each sector in equal amounts. If I buy
a mutual fund that overemphasizes mid-caps, then mid-caps outperform, that doesn't mean that the strategy is sound.
Good, you have brought the discussion back on topic, which is are the advantages or disadvantages based on actual data or intelectual perspective.
That's what I've been trying to discuss since the thread started. So what's with this antagonistic tone I've gotten in return?