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Author: TMFLonghorn One star, 50 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 847  
Subject: Re: how many? Date: 3/28/2008 2:55 PM
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Hi FC - that's a great question and one that many of us regularly ponder. The easy answer is it depends and what each individual is comfortable with, but it sounds like your goals are quite Foolish in trying to ensure you'll have the time and attention to devote to your names and would like to concentrate on your list of best ideas. With that, I'd have to say 50 would push the upper limit in terms of individual stocks - that gets you to 2% positions if held evenly.

I personally have 40 or so names, but my top 10 drive close to half of my performance so I do try best as possible to let me best ideas drive performance. I would like to narrow this down over time, but also can't help thinking that's a pretty narrow list seeing as there are ~8,000 publicly traded securities out there to consider!

Yesterday I attended an investment conference yesterday where Ron Muhlenkamp suggested finding 30 best ideas. I'm also in the process of reading Joel Greenblatt's You Can Be a Stock Market Genius where he demonstrates under 10 stocks can provide you with sufficient diversification, and as you know Warren Buffett has proven legendary in possessing single-digit holdings, which works out quite well when they go through the roof over the course of multiple decades.

To end up my rambling, I think 25 is ideal- 4% weightings on average, which is easily enough to impact performance but not too much to hurt should a position fade into oblivion. Again, your top ideas can account for much higher weightings, and maybe leave 10% of your portfolio for high risk/high return opportunities - a 10 bagger in this bucket of your holdings could really boost performance, even though the initial position is puny.
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