Saturday, June 23, 2007

Glenn Greenberg: Concentrated and Focused Fund

What level of confidence do you need if you have to invest $4 billion dollars in just 6 stocks? Also among these 6 stocks the number one position is 40% of the total portfolio? This is exactly what Guru Glenn Greenberg is doing. It is also a key factor why he could achieve more than 22% a year since 1984.

You may not know Glenn Greenberg, it is not surprising because he does not entertain investment ideas from Wall Street analysts; he does not do marketing, and he does not even speak to his clients. He only communicates with them with two written updates per year.

The most important rule for Mr. Greenberg is that if they lacked the confidence to put five percent of their portfolio in a company's stock, they would not buy any. Therefore he has a very concentrated portfolio. Due to this excess concentration Chieftain typically has less than ten securities in their portfolio. The most number of securities Chieftain has held is twelve and the least, six, while maintaining a 30% cash position.

How does he invest? He said that a person should have an approach that over the long-term will win and will not fail. Investors should not use an approach which can provide both huge returns and huge losses. An investor must figure out an approach that will allow them to be a long-term winner because this is a long-term business. Investors need to win successively because they will be taking profits and reinvesting them continuously over their lifetime.

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