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


Praise for Concentrated Investing

"This is more than a is a detailed compendium of the life and temperament of the greatest concentrated investors...the Simpson and Keynes stories are terrific testimonies to both their practice and their learnings over time...the stories of Simpson and Keynes alone...are worth the book price X 100."
—CHARLES ROYCE, CEO and founder, The Royce Funds

"The pervasive investment world definition of 'risk' today is price volatility. This book reminds us that this definition is a fallacy for true investors. It demonstrates that intelligent concentration is the ideal investment philosophy."
—CHARLES BRANDES, CEO and founder, Brandes Investment Partners

"We all know of 'the World's greatest investor,' Warren Buffett, but how many of us know the man whom Mr. Buffett chose to do HIS portfolio investing, Lou Simpson, who managed the vast portfolio of Berkshire Hathaway's insurance subsidiary GEICO? The brightest stars, like Benjamin Graham, can be seen with the unaided eye. But this book trains the telescope on the less explored parts of the investment skies and provides us with the secret to success: run concentrated portfolios with permanent capital to prevent against capital withdrawals just at the depressed times when bold investment action is called for. Read! Enjoy! And get richer!"
—ALAN KAHN, CEO and cofounder, Kahn Brothers & Co. (Retired)

"I used to run mutual funds, so I did not have permanent sources of capital (in the late 1990s, I lost 7 out of 10 shareholders in less than 3 years). Too bad, because I agree that risk is not volatility, it is the risk of permanent loss of capital. And, yes, it is hard to move away from the herd, but hey, most good things in life come hard. So, as this book suggests, in my next life, I will run a closed-end fund and have a concentrated portfolio."
—JEAN-MARIE EVEILLARD, Senior advisor and former PM of the First Eagle Funds

"Concentrated Investing may not be for all fiduciaries but the principals highlighted in this book—such as Lou Simpson whose career I have tracked since his days at Shareholders Management to Berkshire Hathaway—underscore this proven approach to long term investing. Pick your best stocks and have concentrated holdings—just as Warren Buffett has done at Berkshire Hathaway."
—MARIO GABELLI, CEO and founder, Gabelli Asset Management

ALLEN C. BENELLO, CFA, is the chairman of White River Investment Partners, LLC, a private investment firm in San Francisco.

MICHAEL VAN BIEMA is the founder and man- aging principal of van Biema Value Partners, LLC, and coauthor of Value Investing.

TOBIAS E. CARLISLE is a partner at Carbon Beach Asset Management, LLC, and author of the books Deep Value and Quantitative Value and the blog.

Preface ix

Acknowledgments xiii


Concentrated Investing 1

Chapter 1 Lou Simpson: The Disciplined Investor 5

A Portrait of Concentration

Chapter 2 John Maynard Keynes: Investor Philosopher 35

The Economics of Concentration

Chapter 3 Kelly, Shannon, and Thorp: Mathematical Investors 71

Concentration Quantified

Chapter 4 Warren Buffett: The Kelly-Betting Value Investor 89

Portfolio Concentration for Value Investors

Chapter 5 Charlie Munger: Concentration’s Muse 109

Quality without Compromise

Chapter 6 Kristian Siem: The Industrialist 131

The Importance of Permanent Capital to the Long-Term Investor

Chapter 7 Grinnell College: The School of Concentration 159

Concentration and Long-Term Investing for Endowment

Chapter 8 Glenn Greenberg: The Iconoclast 177

Simple, Common Sense Research, and Tennis Shoes

Chapter 9 Conclusion 203

The Concentrated Investor’s Temperament

About the Authors 221

Index 223