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  • Writer's pictureIshfaaq Peerally

Why I LIQUIDATED 40% of My PORTFOLIO in one DAY 💰


On the first of July this year, I liquidated 40% of my portfolio. Why did I do that? FOCUS

When Warren Buffett $BRK.B met with Bill Gates for the first time, Bill Gates mother asked them what is the most important thing for success. Both of them replied the same thing, FOCUS.

Two years ago, I had 32 stocks in my portfolio because I though that having the more company in your portfolio, the better it is since you are diversified and not putting all your eggs in one basket. Unfortunately, that's not a good idea since being too diversified means you'll do as the market. If you want to beat the market $SPX500, you need to focus on only some good companies that have the potential to do so. Last year, I reduced by portfolio to 18 companies. It worked for some time but earlier this month, I decided to sell all my shares of 7 companies and now I have only 11 companies in my portfolio(It doesn't include workouts which are usually arbitrage and shorter term trades).

The seven companies I sold are Berkshire Hathaway $BRK.B , Munich Reinsurance $MUV2.DE , Morgan Stanley $MS, Wells Fargo $WFC, Bayer $BAYN.DE , BMW $BMW.DE and Tiffany & Co. $TIF . These are not bad companies. I don't think anybody in their right mind will call Berkshire Hathaway a bad company. So why did I sell all of these? I was not focused enough.

For example, I had Wells Fargo, JPMorgan Chase $JPM , Morgan Stanley and Wells Fargo in my portfolio. I had 4 out of the 6 big banks in my portfolio. Logically, if I want to make money from banking, I should invest in the best bank, which in my opinion is JPMorgan Chase, then why am I investing in other banks which are less impressive? Same thing about insurance. I had 4 insurance companies in my portfolio: Berkshire Hathaway, Travelers Companies $TRV, Munich Re and Allianz $ALV.DE . I believe that Travelers and Allianz have better fundamentals to outperform the market in the long-term, therefore, I should only focus on these two. Of course, I had to sell some of these companies on losses, for example, Bayer. That's because of opportunity cost. Instead of me waiting several years for the stock to recover, it is better I invest that money somewhere else. That's why I've been investing in Skyworks Solutions $SWKS, Parsley Energy $PE and Concho Resources $CXO.

Now, it is harder and harder for me to find a new company to invest in. Its because my standards are higher. For example, Morgan Stanley is at a good price but because I don't like their 64% exposure to Non-Investment Graded bonds(junk bonds), I don't want to own the stock anymore.

I won't say that it was a mistake from me. I was young and I was learning. I am still learning. Every day, I become a better investor.

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https://www.youtube.com/watch?v=8MUzTKRiDAU&list=UUPO3uUyoXSaFWG-Ldq1mqEQ

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