High Conviction Portfolios
“It is a mistake to think one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.”
— John Maynard Keynes*
KAR follows a different approach to investing than the typical investment manager. Given our high-quality focus and in-depth fundamental research, we build high conviction portfolios of 25 to 50 securities. The traditional approach, which focuses on short-term price movements and quarter-end earnings results, is to build portfolios of 75 to 100 securities to diversify market risk and minimize the impact of individual holdings.
Our approach, which evaluates long-term earnings power and the sustainability of returns, identifies up to 50 of the highest quality companies that maintain competitive protections and have little individual business risk. Our goal is to find the best businesses to mitigate risk rather than owning the most businesses in an attempt to diversify away from risk.
*Founder of Keynesian economics and modern macroeconomic theory