Rudi’s View: Confidence In Quality Rewarded

Rudi's View | 10:00 AM

By Rudi Filapek-Vandyck, Editor

Many years ago, I read a story by Marcus Padley praising the virtues of a one-stock investment portfolio.

The philosophy behind the idea is that when all your money sits in one stock, you will make sure you know every in and out about this company and you'll know when to take some money off the table and when to buy additional exposure.

The concept also makes sure you concentrate all your efforts in the right place. There's only one company to follow, query, research and analyse. Anyone can do this.

It's an appealing concept, assuming you choose the right company, which is always straightforward when we allow Harry Hindsight to have his say.

In my personal case, I might have chosen TechnologyOne ((TNE)) whose growth trajectory since 2004 is nothing short of 'stunning'.

Consider the share price back then was less than $1 and this week the price has exceeded $30. I am not even going to put a mathematical appreciation on this.

Year-to-date the shares have rallied more than 100%.

You wonder why I would ever buy an index ETF or try my hardest trading in and out of stocks whose momentum comes and goes.

But, of course, I could also have chosen CSL ((CSL)) which until the early covid-panic of 2020 had been an equally stunning investment for many years, but a whole lot less so since.

I would have built-up a lot of frustration had I put all my money into CSL, there's no denying it.

The underlying philosophy behind the one-stock portfolio does appeal though and the longer I analyse and comment on financial markets, and run my own Portfolio, the more I gravitate towards the core philosophy as expressed by investment legend Peter Lynch: Know what you own, and why you own it.

Truly achieving that, to be frank about it, is a whole lot easier to do when you concentrate your efforts around a selected basket of companies you get to know intimately as you own a large part of the targeted selection over a prolonged period of time.

This is essentially the framework I have created for myself and for those investors who pay attention to my specific research into All-Weather Stocks.

I like the idea of getting on board the TechOne shareholder register when only a few others are paying attention and still praising the company's quality and achievements many years later when just about everyone is starting to pay attention because the return has been absolutely phenomenal.

I am still not in a mood to sell and that confidence is built upon the multiple experiences and insights accumulated over that long period of ownership.

Having said so, one should never fall for hubris and fail to understand the importance of pure plain investor's luck. I might have been confidently singing the praises of TechOne for many years now, there's a big difference between being confident and knowing exactly how the future will play out.