Portfolio allocation, page-38

Some terrific insights from all, thanks for the comprehensive breakdown of thought processes. I get a very strong impression that this group has breezed through the last 6 months and is in a better position now than before.

There were lots of thought-provoking comments which have drawn a couple of extra questions if you get the time.

@Transversal You mentioned a 10% cap on new additions. Do you trim those positions above a certain level, and if so with the benefit of hindsight, do you think trimming has had a positive effect on the portfolio performance?

@hankreardon I completely concur with your first point about value investing being a crowded space. This has frustrated me somewhat in the years leading up to 2020.This paragraph explains how you have successfully countered this:

"5. Modelling error is bar the most fruitful way of finding stocks that are statistically likely to outperform. Specifically- is is when the majority of market participants do something in a certain way because it is the cookie cutter way of doing things, and a bespoke model is actually correct. If there is a very large discrepancy between the bespoke model and the standard model, extraordinary profits can be made."

Is it asking too much of your IP to expand a bit on what you mean by "bespoke model"? Do you mean you might construct say a DCF model for one company where others would use earnings multiple or are you talking more about the assumptions in the inputs to the model, or are you putting a greater emphasis on less popular valuation metrics?

I hope this thread can continue to develop over time particularly where dynamic movements shape opinion. There is a good body of knowledge above and its always interesting to see how it holds up over time. I have no doubt it will.