The concept of Focus Investing is devilishly simple. Take the magnifying glass out and focus it on the very best investment ideas you have. Don’t pull the investment trigger unless you can say this is too good to pass up.  It is the extreme opposite idea of diversifying your investments in the manner suggested by many financial advisors.

As Whitney Tilson of T2 investments said, “the overwhelming majority of great investors that I’m aware of practice focus investing. They invest infrequently, only when they’re highly confident that the odds are heavily in their favor, and then they bet big.” Focus investing is the same idea as the Buffett-Munger concept of only swinging at the Fat pitch. As Charlie Munger said at a Bershire Hathaway annual meeting, “If you took out our 15 best ideas, most of you wouldn’t be here..We have this investment discipline of waiting for a fat pitch.” You will get a lot of investment ideas pitched to you. Most you should let go. But when you see a pitch that is perfect for your investing style, one that you understand, one that is right where you like to hit, then don’t hold back and put everything you have into the swing. Finally Robert Hagstrom said in his book, The Warren Buffet Way, “Reduced to its essence, focus investing means this: Choose a few stocks that are likely to produce above-average returns over the long haul, concentrate the bulk of your investments in those stocks, and have the fortitude to hold steady during any short-term market gyrations.”

Focus Investing  is such a fundamental part of my investing strategy, that I sometimes forget it is with me. I have never owned more than 10 stocks at one time, even though I have 3 trading accounts. Sometimes I have had more than one position in a company in different accounts. If it is a great idea, pile on. Every time I look at making a new investment I look at what I have invested in, and I look at the available investments that I am aware of and ask myself the question, is this a better opportunity than one I have already invested in? But more importantly, is it a great investment? Is it an investment idea that has so much going for it that is seems almost foolish not to put my money down.

For the small time investor or beginning investor, you do not have the time or fortitude to track the 30 plus equities that persons who recommend diversification suggest. The fewer companies you own pieces of the fewer places you have to watch for the proverbial ball dropping. You are more likely to understand the company. Focus Investing is ultimately like Value Investing itself. It either makes sense to you or it doesn’t. If it doesn’t try something that does work for you.

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