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Jim:

Thanks for your reply. It's great to hear your insights, especially after some time to test your ideas in the rising star portfolio.

In particular, I side with your belief that one should scale into a full target allocation, as the benefit of being basically right over time outweighs the risk of being precisely wrong with one large buy. If some new information comes along that dents your thesis before reaching a full position, then you can hold off futher buys. The risk of large buys might work if you "trade into" a (hopefully) long-term position with a mental stop-loss in mind. I'm not inclined to cut my losses in any mechanical way, since I'm most likely to add to the position, unless a material event has shaken my resolve.

I'd like to hear more about how you decided on a max position size of a position that has appreciated to 10-12% of the portfolio. My question is: Isn't overvaluation the main risk with this position size, and not purely concentration? For example, if the stock has stayed below fair value, but has appreciated in line with significant value-creation, why not continue to let it run?

Anyway, I really appreciate your previous reply, and eagerly look forward to following this board.

-AJner
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