Highly diversified portfolios are often engineered for mediocrity and tend to reveal a lack of conviction. Instead, we believe a concentrated portfolio of well-chosen positions holds greater potential for differentiated gains. Our time and effort is better spent focused on a small list of securities holding the greatest potential for appreciation.

This is also a practical matter, for what manager is capable of monitoring dozens of investments effectively? A result of deploying our attention and capital into our best long ideas is that fund volatility may be high from time to time. To paraphrase Warren Buffett, while 12% returns may be smoother we desire 15% returns, however “lumpy”.

We do not equate volatility with risk, but rather with opportunity, and would advise investors looking for stable periodic returns against investing in the fund.