It's a unique strategy for sure. My question is how do Charlie Munger and Warren Buffett inspire your decisions when your fund is antithetical to their style? Since you've only spent a few minutes on each stock, you can't possibly know the quality of the business or the competitive environment they operate in. If it becomes obvious that one of your picks isn't as high a performer as you thought, do you remove it and choose another or are you going to hold these for a very long term?
My strategy is not 100% copy of anyone out there. It's a combination of a bit from many investors and some of my own thoughts.
Charlie and Warren:Charlie Munger inspired me most. I did not get much from Warren Buffett. His idea is too vague. Charlie Munger is more straight to the point. My personality is more like Charlie's. I am an INTJ and I've read that many people think Charlie Munger is also INTJ. I recalled Charlie Munger mentioned: It's better to buy high quality businesses with fair price than buy mediocre business with good price. This idea stuck with me.
I also recalled Charlie mentioned: create a few good variables and minimize/maximize them,use these variables as filter, the result will be very good. (e.g. Costco minimizes the price, passes savings to consumers, and they do very well. ) It's exactly what i did. I focus on the business result and stock performance. If business does well, stock will follow, quality businesses out performs in long term. I don't dig into too deep in businesses details because if the result is good, then the detail is also good. What worried me the most is: business ethic. I don't buy certain businesses out of ethical and personal reasons.
Warren Buffett was more a Benjamin Graham style Value investor early on which he focused on beaten down stocks. I believe Charlie Munger influenced him to a more quality approach. BRK still does special situations. (I know BRK saved many companies in distressed and made a good profit but BRK later focused more on quality businesses. BRK is big now and options are few. It's hard to find elephant sized quality business with fair price. I understand it's tough for them to grow at this point.
I initially listened and followed Warren's idea of 20 buckets and bought just 30 stocks. I was doing ok for the past 10 years getting 13% return. Recently I realized I can do better, I think in a huge market like US plus smaller market in Canada. Limit out self to 20 stocks, is like putting shackle to limit the choices of investment. My goal as a growth investor is to get 15% to 20% per year. In order to reach this number, I need to capture as many young stocks that will triple or more in 5 years. That means holding high growth businesses in early stage of their growth. I may not get into next Amazon, shopify but my chance is high if I own 160 evenly distributed growth stocks. Most of my portfolio will still be in well established businesses and about 10 to 20% are in early stage businesses that are growing rapidly.
I trying to find businesses that are growing rapidly and ALSO there's a huge crowd of investors buying it steadily in the long term. It's no use to buy something if no one else is interested. Most likely, if you combine the high performances of a business and big crowd following, the market is likely correct to predict the next AMAZON or Shopify.
The result in the past , and so far it confirmed my approach works.
Peter Lynch: I learned the important idea that business revenue/profit drives stock price. It's true most of time. I found this is not always true. Sometimes stock price is out of line with the fundamental. Then I thought : is there such thing is cult stock and googled: cult stock and this term came up!
Benjamin Graham: 10 years ago when I just started, I've read Benjamin's books, I've focused most of my energy on balance sheet, looking at numbers with out checking stock price performances or thinking about the whole business environment. I ended up buying many medico businesses going nowhere. It was not good result.
Now I think He's too academia and all theories and formulas... I think in a bigger picture at different angles. I don't think investing is an exact sciences for retails investors. Institutions need to be exact but not retails investors. I tried value investing in early years and didn't like it. Now I think growth investing is best approach for buy and holder. I had the scary thought not long ago that for growth stocks, the higher it goes, the more it can crash! But the reality is not true. When growth stock slows down, it may drops 30% and reach a plateau but will not go back to beginning price. if a stock doubled, tripled, quadrupled and stock crashed 30%, the result is still very good. And in a diversified portfolio, not all growth stocks reach peaks at the same time so the performance is nice and smooth, going up steadily. People won't believe this is the case.
What if I am wrong: This is the problem with index/mutual funds. They hold on to losers. It's not unusual for an index fund/mutual funds to hold onto losers in decline or goes side line for 5 years. It's just doesn't make sense to me.
I estimate I could be wrong 5% to 10% of time. Even Warren Buffett is wrong sometimes, you can read about his mistakes online. In my case, when I say I am wrong, it doesn't' mean the stock goes to zero. It means the stock doesn't performs as well as expected 15% to 20% per year in long term. If a stock goes nowhere for 2 to 3 years, I'll dig into it and find out what's wrong, is it temporary thing or long term issue? and if it's short term, I'll hold it longer, max 5 years. If long term issue, I sell and switch to better stock. I don't need to know the news of each stock right away. I'll wait it shows up on the stock price and find out later. Stock market is smarter and more efficient than Benjamin knew back in the old days before internet.
and if I am wrong, at 160 equal weighted numbers, each stock represents just 0.625% of the whole portfolio. anyone goes bad will be offset by most of them that goes correctly. So far this year, 90% my stocks went up and only 10% went down. Year to date performances meet my expectation, slightly exceeded my expectation.