Buy Hold Sell: 6 high-conviction small caps

2021-05-28

They say that it is an investor's best ideas that produce the best returns. It sounds simple, right? (Right?) And yet, investors and fund managers' portfolios consistently balloon out to 40, 50, or even 60 holdings or more, with diversification for downside protection often to blame. And while no one - and I mean no one - likes to see their portfolio in the red, Harvard Business School researchers Miguel Antón, Randolph Cohen, and Christopher Polk recently found that a portfolio of high-c...

They say that it is an investor's best ideas that produce the best returns.

It sounds simple, right? (Right?) And yet, investors and fund managers' portfolios consistently balloon out to 40, 50, or even 60 holdings or more, with diversification for downside protection often to blame.

And while no one - and I mean no one - likes to see their portfolio in the red, Harvard Business School researchers Miguel Antón, Randolph Cohen, and Christopher Polk recently found that a portfolio of high-conviction holdings - AKA your best ideas - actually statistically outperforms.

In fact, they found that active and hedge fund managers' top ideas outperform the market - as well as their other holdings - by approximately 2.8-4.5% per annum. Meantime, the vast majority of the other stocks these managers hold don't exhibit this significant outperformance.

So, in this episode of Buy Hold Sell, Livewire's Ally Selby is joined by arguably the best Aussie small-cap managers in the country - Chris Stott from 1851 Capital and Marcus Burns from Spheria, for their analysis of their best three ideas. Plus, they'll share their thoughts on each other's top holdings too.

Note: This episode was filmed on 27 May 2021.

Comments (3)