Warren Buffett used to quip that the best stock to buy was one that you already owned in your portfolio because you cannot expect that your eighth, twelfth, or twentieth idea will ever be as good as your best idea. Sometimes, investors get this idea that they always need to be on the move towards the next “new” investment, when really, the best stock to buy could simply be adding to something that you already own.
It’s a phenomenon that I’ve certainly seen play out before in my case studies. In 2004, Charlie Munger gave Li Lu of Himalaya Partners approximately $98 million to invest on behalf of his family. The funds came with one notable string attached, as Munger required Lu to promise to close down the fund to new contributions and only manage the money that he had received from other partners to date.
Since that time, … Read the rest of this article!