Sequoia : Don’t Try To Emulate Your Investing Idols

Johnny HopkinsSequoia FundLeave a Comment

In this interview on the Value Investing With Legends Podcast, Chase Sheridan & Will Pan from Ruane, Cunniff & Goldfarb who manage the Sequoia Fund discuss why you shouldn’t try to emulate your investing idols. Here’s an excerpt from the interview:

A lot of folks getting into this business want to emulate their idols. They want to emulate Warren Buffett, or they want to emulate Joel Greenblatt. The issue with concentration is that the right answer for one person is not the right answer for another person.

It really depends on what your edge is, and the appropriate level of diversification is different for different people and it’s even different for different firms across time. If you look at Sequoia Fund in the eighties we often ran with a single digit number of stocks in the portfolio. It was a different level of competition back then number one, and number two we didn’t have the resources that we have today. And so today Sequoia runs with about twenty five stocks in the portfolio, and that feels appropriate for the time.

What I don’t like to see is young first year portfolio managers emulating Warren Buffett by being hyper-concentrated in their portfolios or emulating Joel Greenblatt by owning five stocks when they don’t have the same level of advantage that Buffett did when he was investing in American Express after the salad oil scandal or Joel Greenblatt was investing in spinoffs in the eighties.

It really is an individual answer for each different manager and it depends on what advantage you bring to the table.

You can listen to the entire podcast here:

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