2Yr·

Hello,

I have developed a fascination for (strongly) focused portfolios with high-quality shares and am currently giving some thought to how I would implement this.

The attraction is clearly to have a higher chance of outperformance and to be able to follow the selected companies in a more concentrated way. For me, this would also be a more relaxed B&H&C, as there are fewer stocks and only high quality, where price losses are more likely to invite additional purchases.

The higher volatility is not a problem for me, as I can cope with it psychologically and have an investment horizon until at least 2040.

I would still be overweight in tech. The sector allocation would remain very similar to my current portfolio of 16-20 stocks. Tech, pharma/biotech and luxury are my favorite sectors with which I feel sufficiently diversified.

I would also make sure that the companies themselves are somewhat more broadly positioned or, if "one trick pony", then with a strong moat (e.g. $ASML (+1.18%) ).

Option 1 is the following (extremely focused!):

20% $MSFT (-1.7%)

20% $ASML (+1.18%)

20% $MC (+1.78%)

20% $DHR (+2.53%)

20% $BTC (-0.85%)

Variant 2 is similar, only with 2 companies per division:

10% $MSFT (-1.7%)

10% $GOOGL (+0.25%)

10% $ASML (+1.18%)

10% $AVGO (-1.43%)

10% $MC (+1.78%)

10% $RMS (+1.37%) or $RACE (+1.78%)

10% $DHR (+2.53%)

10% $VRTX (+0.56%) or $MEDP (+1.79%)

20% $BTC (-0.85%)

What are your thoughts on this? People who also have a focused strategy are also welcome. 👍🏼

Best regards

7 Comments

Felix@Investor_in_Jogginghose

2Yr

Say hello!

I've been investing for 10 years now and with a similar approach for about 7 years. The first 3 years I still had etfs until I dared to do more.

I personally find 5 positions too risky. If you focus on just a few stocks, you might miss out on unique opportunities that arise due to scandals or similar.

For me personally, it has proven to be a good idea to look at a large number of shares and to observe a universe of good companies and invest when opportunities arise.

The timing of a purchase is also crucial for outperformance. There are often only short periods in which a share is undervalued.

I think it is very difficult to determine the best 5 performers over the next 10 years at this point in time. The future is often characterized by black swans. (Nvidia AI, Novo weight loss top). Nevertheless, I have/had both stocks, through precise daily screening (Novo unfortunately sold due to real estate purchase would have been 600% more RIP).

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Marcel@Kytez

2Yr

@Investor_in_Jogginghose Thank you for the insight.

However, I think that you don't necessarily have to buy high quality companies when they are undervalued. Fair valuation should also be sufficient for outperformance, as these companies (rough backtests with random samples) achieve over 15% p.a. after entry at fair valuation.

They grow faster through strong positions in good growth markets.

Buying only overvalued is a certain risk in my opinion.

But I agree with you that it makes more sense to hold 10 positions. Thanks to this, you clearly take out the risk of individual fate compared to 5 positions 👍🏼

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Felix@Investor_in_Jogginghose

2Yr

@Kytez if you generate a 15%+ return after buying, then the share was undervalued. 😂
I'm not necessarily talking about low kgvs with undervaluation but rather low PEGs. For example, Nvidia could have been undervalued yesterday before the figures, the sentiment was also very pessimistic.

I wanted to come back to bitcoin. Since it behaves like a commodity, a valuation like for shares is not possible. 20% on a digital commodity? How do you justify that?

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Gerit@Gerit

2Yr

Best first-hand tip: don't try to outperform, but try to achieve a "safe" return of ~9-10%.

Could save you years.

Good luck & success! 🥂

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Gerit@Gerit

2Yr

By the way, the right price will count in the end, you need a lot of patience for that, it could be that you wait years for a company and can only collect a few dividends on the side... a high cash ratio doesn't make sense either.

So, for example, okay, ASML, great, I'd love it, but now?

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DerDanner@Therapeut

2Yr

Have the same investment approach as you📈🫡 focused on quality companies I try to cover different sectors, currently 6 stocks 2 cryptocurrencies

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Krush82@Krush82

2Yr

I am also a friend of focused portfolios. Variant 1, regardless of which stocks are in there now, would be too risky for me. I could probably live with a 10-15% weighting/position.

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