In his recent interview on the Investing With Tom Podcast, Guy Spier discussed placing right-sized bets. Here’s an excerpt from the interview:
Spier: Well the investment that we make obviously we make the investment hoping it’s going to be a multi-bagger but we don’t know, we can’t predict.
So we need to be aware that there’s a certain chance that it will go bankrupt, there’s a certain chance that we’ll do nothing but we need to be in a position that if God willing if we’re really lucky and it’s number three then we can hold on to it for a long time.
So what we want to do is we want to risk enough that it’s meaningful but not so much that it wipes us out, and by the way wiping us out just does not just mean on a portfolio basis or also means psychologically.
In Laboratory Corporation of America I allowed me to wipe myself out in that position psychologically. It was a psychological wipe out not a financial wipeout.
You just want to keep making these bets that are meaningful and allowing them to unfold the way they unfold which of course is one of my big takeaways from Berkshire is that this is all that Warren’s doing all day long, and he’s doing it both in private businesses and in public businesses, and some of them worked out spectacularly well and some of them don’t.
If they don’t they don’t that’s okay, and that doesn’t mean the people are bad, doesn’t mean… your process is a good process. So for me that’s… the five percent is a great place to be, a great place. That still holds for me and I think it’s kind of probably a formula success for the rest of one’s life actually.
You can watch the entire discussion here:
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