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Author: washcomp Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8754  
Subject: Re: please critique my simple-minded... Date: 1/21/2011 8:56 AM
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$hit happens to even those stocks perceived as solid at the time you buy them. Look at GE during the 2008-2009 period. Look at BP who poked a hole in the sea bottom. As has been pointed out, while BH will not necessarily be impacted by the evaporation of WB, the stock price likely will. Optimizing which specific company to pick is an art form, but preading your risk is not quite so hard. A trivial example is that I believe that it is prudent to own a mining company. I could buy a copper miner like FCX, but there future is mostly based on a single commodity, mined in a single country. The same is true of owning a coal or gold miner. OTOH, if I hold BHP (or as I do, BBL), RIO and VALE, I get a diversified pread across the territory. If something happens (like, say an unlikely flood in Queensland Australia), it may impact one or two of them, but the other is likely to benefit. It creates long lists of stock in a portfoio, but so what? This is a game of using your best ideas, but spreading the risk. BRK.B is a fine stock and I own some of it, but if I have the urg to get into consumer foods, for example, I'll buy Coke and Kraft (and maybe add Nestles, Smukers, Campbell and Heinz for good measure), rather than more BH.

Just how I tend to run the game.

Jeff
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