Concentrated Investing: Strategies of the World's Greatest Concentrated Value Investors

by Allen C. Benello, Michael van Biema, Tobias E. Carlisle

Discover the secrets of the world's top concentrated value investors Concentrated Strategies of the World's Greatest Concentrated Value Investors chronicles the virtually unknown—but wildly successful—value investors who have regularly and spectacularly blown away the results of even the world's top fund managers. Sharing the insights of these top value investors, expert authors Allen Benello, Michael van Biema, and Tobias Carlisle unveil the strategies that make concentrated value investing incredibly profitable, while at the same time showing how to mitigate risk over time. Highlighting the history and approaches of four top value investors, the authors tell the fascinating story of the investors who dare to tread where few others have, and the wildly-successful track records that have resulted.

Turning the notion of diversification on its head, concentrated value investors pick a small group of undervalued stocks and hold onto them through even the lean years. The approach has been championed by Warren Buffett, the best known value investor of our time, but a small group of lesser-known investors has also used this approach to achieve outstanding returns.

Discover the success of Lou Simpson, a former GEICO investment manager and eventual successor to Warren Buffett at Berkshire Hathaway Read about Kristian Siem, described as "Norway's Warren Buffett," and the success he has had at Siem Industries Concentrated Investing will quickly have you re-thinking the conventional wisdom related to diversification and learning from the top concentrated value investors the world has never heard of.

Genres: Finance, Business, Nonfiction, Money

219 pages, Kindle Edition

First published February 29, 2016

Reviews

[Asif · Rating 4 out of 5]

Nothing groundbreaking in the book. It is however easy to finish and the stories were interesting enough.

[Berwyn · Rating 3 out of 5]

This book looks at investors who have been known for making huge bets, concentrating a large portion of their capital on a handful of stocks. The investors covered are mostly bottom-up value investors, with the most famous being Warren Buffett and Charlie Munger. You will not read in this book about George Soro’s billion dollar bet against the Pound or Bill Ackman’s shorting of Herbalife. You will read an introduction of each investor and how they came about being concentrated investors, some of their investments and the story behind those ideas.

The investors featured in the book share common traits. In fact, four of the investors featured know each other and their stock purchases are similar. They use a bottom-up approach to investing, only buying stock of companies that they truly understand. Charlie Munger mentions that it is not possible for one to be able to fully understand a few hundred stocks. You only need to understand a handful of companies and keep working on your number one idea instead of your number twentieth idea. These investors also are willing to hold the equities purchased for the long term, at least for a few years.

The interesting part about these investors is that they did not start out looking at high quality companies going at fair prices. Buffett and Munger started out as Benjamin Graham style investors, looking for companies that were selling below book value. Buffett now frequently cites See’s Candies as the perfect business, but he was apprehensive about paying three times book value for the company when See’s was available for sale in the 1970s. John Maynard Keynes, the famous economist, was initially a trader of currencies and commodities. He believed his superior knowledge of macroeconomics would benefit his trading. However, the Great Depression wiped him out when the panic caused the prices of everything to fall, negating the hedges he made in his long/short portfolio.

Besides value investors, a few other investors are featured, such as Edward Thorpe, who made money from arbitrage, and Kirsten Siem, an industrialist in the oil and gas industry.

The shortcomings of this book is the repetition of various quotes and passages, especially in the closing chapter. Also some parts of the book reference academic studies, which are dry and overly focused on details. The chapter on Buffett includes a theoretical backtest involving book value. Buffett has never advocated purchasing stocks using solely book value.

Overall, you get to understand the rationale behind being concentrated in your investments. The investors featured have the track record to prove it and many quotes they made are cited in full here, letting you read their ideas in their own words. Concentrated investing goes against the diversification maxim sprouted by many money managers. However, if you are a passive investor who is not interested about the stock market, you should go for maximum diversification by buying an index tracker where you follow the market.

[Pratik Kothari · Rating 2 out of 5]

Below average. Skipped a large part of it. Too much focus on Warren Buffett and Charlie Munger.

[Pyoungsung Choi · Rating 4 out of 5]

한동안 투자관련 책을 안보다가 최근 좀 몰아보고 있는데 가장 신선하고 재미있었다. 기존의 분산투자의 효용에 반하는 내용인데, 제대로 공부한다면 집중투자를 안 할 이유가 없다는 것이다. 집중투자로 성공을 거둔 투자자들의 사례가 나오는데 모두가 깊이 있는 분석과 통찰력, 군중과 거리를 두는 기질 등을 보유했다. 3가지를 가지고 있지 못하다면 위험할 것이다. 스스로 되돌아보는 계기가 됐다.

[Yaugun · Rating 5 out of 5]

One of the most insightful Value Investing books I have read.

Written in a fairly basic level, Benello et al offer a wide perspective and numerous examples of the benefits of concentrated portfolios from impressing investors in very different contexts. As I had barely knowledge of Buffett and Munger trajectory, it was an astouning experience to examine their wisdom with the focus of concentrated investing. However, any old Buffet's work student might find it partly redundant with Berkshire's wisdom, anyhow, might be worth it to re-check it. My favourite, though, was Greenberg; who is an investment wizard that is difficult to get much information about. Thorp part is also enjoyful, offering an inusual quanititive investment approach related with Game Theory and the Kelly Criterion (also very willing to read his books).

Cannot wait to read Deep Value as well. Undoubtly recommending this work.

[Muhammed Umar · Rating 5 out of 5]

Valuable insights to concentrated investing

[Anil Tulsiram · Rating 5 out of 5]

Must read just for the sake of Chapter 2 on Keynes.....

[Nuno Freitas · Rating 2 out of 5]

There are no prizes for guessing what this book is about and its thesis.
The book repeats itself way too much and it is not as in-depth or grounded in research as I thought it would be.
All in all, you get to read a few stories of seasoned investors with great track records, but there's not much more to it.
I'd summarize its thesis as such:
- Focus on the investments you truly know and believe in. And by focus, it means leaning heavily on them with a very large part of your portfolio.
- Exercise good temperament, as in, tune out what everyone and everything is saying. If you believe in the investment thesis just hold for the long run.
- See the capital as "permanent capital". Don't count on it for redemptions, which would make it considerably easier.
- In some cases, consider trading the companies you know well as in, build positions on them but, if the valuation gets to ahead of itself, consider selling and vice-versa.
- Cigar-butt investing tends to be very hard to perform well in without a catalyst to extract that value. Therefore, focus instead on quality companies that will keep improving earnings for the long run, which could also lead to a multiple re-rate.
- Over-diversification leads to average returns. These top investors never had much more than 10 companies in their portfolio if so.

[Firsh · Rating 4 out of 5]

I had to use AI voice narration and for that to work some edits needed to be done to the epub. Mainly to remove the footnote reference numbers because the voice kept reading them (along with the many tables in the book that are not very joyful that way). So I skipped those and the references. However, it was still useful as something in me agrees very much with the idea of concentrated investing and the ideas its proponents brought up in the book. Like why would you put money in your 20th best idea. I find myself selling more and more of my holdings that don't agree with my persona or on any grounds that could make them no longer a swan pick. I have no problem with big positions as long as they are good of course. Chapter 6-7-8 were not of people I was interested in but the rest were more than okay. I liked to revisit the Kelly formula with this book, and was pleasantly surprised to hear Lou Simpson's name about whom the first chapter was written, as I have read Buffett's letters and I knew about him already. For some reason, I never considered Berkshire's "portfolio" as concentrated since they have quite a few subsidiaries by now. However, it is now clear that a few holdings make up the majority, and there are lots of tiny ones. Much like my portfolio, and it's okay to keep some trophies that look good but are not meaningful anymore.

[Shyam Sundar R · Rating 5 out of 5]

The anectodal style of presentation makes this easily readable. The key messages of value investing are covered in detail through numerous examples. Apart from Charlie and Buffet the chapters on other investors is very inspiring.
Key messages are
1. For a active investor concentration is the key to achieving above average returns
2. Conviction and temperament are two most important characteristics to have for a value investor
3. Backing oneself through infrequent and large bets is key to investing success

Wonderful read and Highly recommended.

[Jakub · Rating 4 out of 5]

A great book about value investors and their portfolio allocation, it was explained well. Investors list includes Lou Simpson, JM Keynes, Kelly (+ Shannon and Thorp for the Kelly criterion), W Buffett, Ch Munger, Kristian Siem, Joe Rosenfield (Grinnell College) and Glenn Greenberg. One chapter, one investor + merged conclusion.

[Vibhor Jain · Rating 4 out of 5]

A decent book on successful investors applying concentration in their portfolio. The book could have been structured and presented better. The conclusion in the end also seem to be hurriedly put together. Too much repetition and quotes. The concept of Kelly Criteria was nicely explained (not too mathematical).

[Scott Hill · Rating 5 out of 5]

Having been in the world of finance for 45 years, I thought I knew all the greats, but this book taught me that there were some phenomenal investors that flew under the radar. The one thing that stood out for me was that in order for them to achieve what they did they had to deal with people of significant influence who had absolutely no talent

[Val · Rating 3 out of 5]

Interesting summary of the business philosophies of several prominent investors. The underlying thread crossing them all was that they shunned excessive diversification and favored keeping fewer positions.

[Pawel · Rating 5 out of 5]

Five stars for the insights and being easy to read. The book is not perfect though - too heavy on Buffet/Munger, somewhat repetitive, conclusion section reads like a rushed summary. Still insightful for folks interesting in portfolio construction/sizing and / or value investing.

[Daniel Deptula · Rating 2 out of 5]

Shallow for a book that highlights concentration. The chapters lack depth into the analysis of investment decisions except for the Siem chapter: the Buffett/Munger stuff can be found in plenty of other books

[MADHUKAR DAYAL · Rating 5 out of 5]

A book for really brilliant minds.

[Harsh Thaker · Rating 5 out of 5]

Excellent analysis of concentrated investing followed by Best and famous investors and Best and unknown investors. The chapter on Kristian Siem is worth the price of book.

[Thomas · Rating 5 out of 5]

Great cases of allocators!

[Cian · Rating 4 out of 5]

Basically just goes through a few investors who tend to concentrate their holdings and the rationale behind concentrating

[JS · Rating 5 out of 5]

A book filled with actionable information, in that respect it is better than "Richer, Wiser, Happier."

[Ryan Madden · Rating 4 out of 5]

Really good book on concentrated value investing. A little uneven, but most of the chapters were amazing.

[Sy. C · Rating 3 out of 5]

3.5 stars. The Buffett chapter was really a summary of Hagstrom's "Warren Buffett Portfolio". The chapters on Siem, Kelly / Shannon / Thorp, and Grinnell College were slightly better. Overall, I felt the author possibly used some of his analysts / associates to write the bulk of the book except the parts that involved interviews with the managers.

[Joel Gray · Rating 5 out of 5]

A POLICY OF PORTFOLIO CONCENTRATION MAY WELL DECREASE RISK IF IT RAISES, AS IT SHOULD, BOTH THE INTENSITY WITH WHICH AN INVESTOR THINGS ABOUT A BUSINESS AND THE COMFORT LEVEL HE MUST FEEL WITH THE ECONOMIC CHARACTERISTICS BEFORE BUYING INTO IT.

Having the right temperament and the right capital structure makes it possible to concentrate on the best ideas and hold them to fruition.

The market is the ultimate blackjack game where you dont bet when odds arent in your favour and bet big when they are. Casinos restrict this but markets do not. Patience is the key.

Lou Simpson, John Keynes, Kelly, Shannon & Thorp, WB, Munger, Kristian Siem, Grinnell College

The more people you have making investment decisions the more difficult it is to do well.

Pay only a reasonable price, even for an excellent business.

The market fell 89% between 1929 and 1932. It took the market to 1954 (25 years) to reach the peak again.

When the cards arent shuffled after each hand the hands were not independent of one another (until automatic card shufflers).

Kelly criterion - % to bet = (probability of winning * collect if win - 1)/(collect - stake)

Are management honest, smart and hungry?

Lock-ups often save people from themselves.

Concentrated investors must focus on stable businesses and avoid those in rapidly changing industries.

Beware the risk of outside capital. Only Greenberg manages outside capital, out of the managers in the book.

[Tirath · Rating 3 out of 5]

Some chapters are fantastic - like the ones on Kelly Shannon and Thorp, Lou Simpson, Kristian Siem (which is an odd entry for the book).

But some like Greenberg, WB and CM seem like fillers - as though they were easy to put in, hence.

There is definitely a lot to learn from the book since there arent many profiles available of concentrated investing - but there is a lot missing, such as concentrated investors who failed, or how selling is a difficult decision.

Get the book if you love to learn from the greats - but there are better investor profile books out there.

[Stan Gorozhankin · Rating 4 out of 5]

A good overview of concentrated value investing but nothing special. More than half of the book is devoted to Buffett and Munger. The key conclusion: in order to be a successful concentrated value investor, you need to a) have the right temperament i.e. be patient and have the courage to go against the herd b) hold from 10 to 15 stocks, which you really understand c) have a permanent source of capital.

[Subash · Rating 1 out of 5]

Totally boring book with lots of quotes and google-searchable facts, zero wisdom, zero coherency, zero writing skill. Basically a book you can very very easily decide to skip. Will save your 4-5 hrs.

[Hongcheng · Rating 4 out of 5]

集中投资是专业选手的正确选择。业余选手还是适度分散比较好。