Value Investing Almanack

Wit and Wisdom on Value Investing

Vishal Khandelwal

đź“š The Psychology of Money

Have you heard of Kent Evans? No?

Okay, have you heard of Bill Gates? Yes?

Let me spill the beans here. Kent Evans was Bill Gates’ first best friend, his classmate at Lakeside School in Seattle, and a co-member of a school-sanctioned computer club called the Lakeside Programmers Group.

In the documentary Inside Bill’s Brain, Bill Gates described Kent as extremely clever, carrying a briefcase with all kinds of gadgets and magazines everywhere he went.

The two self-proclaimed geeks loved scheming about what they would be doing in the future, much to the eye rolls of their classmates who were more concerned with the activities of that moment, the upcoming school dance.

Together, they would read Fortune Magazine and imagine, “If you went into the civil service, what did you make? Should we go be CEOs? What kind of impact could you have? Should we go be generals? Should we go be ambassadors?”

Bill and Kent believed they would go on to do extraordinary things.

Just one of them did it. Bill Gates went on to start Microsoft and the rest, we know, is history.

What happened to Kent Evans?

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Spotlight: How Many Stocks Should You Own?

“Never put all your eggs in one basket.” ~ Proverb

“Concentrate your energies, your thoughts and your capital. The wise man puts all his eggs in one basket and watches the basket.” ~ Andrew Carnegie

The fight of putting all your eggs in one basket and not doing so seems as old as the egg itself.

The story is the same when it comes to diversifying (eggs in many baskets) or concentrating (eggs in very few baskets) your investment portfolio.

So if you are grappling with this question – “How many stocks should I own to make a diversified portfolio?” – don’t worry for you are not alone in struggling with this question.
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Spotlight: Stocks for the Long Run

One of Warren Buffett’s all-time great investments is Coca-Cola, and it just happens to be the stock Berkshire Hathaway has held the longest. There is no other holding that better exemplifies his investing skill, patience, and temperament than this one.

Buffett first started buying shares of Coca-Cola in 1988, and seemingly paid around $2.5 per share (adjusted) for his purchase. In 2019, the company paid a dividend of $1.6 per share, thus taking Buffett’s dividend yield from the stock to 64%!

Effectively, whether Coke’s stock goes up or down in any given year, Buffett is certainly earning his 64%.
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