A few days back, a friend called me to discuss a new stock idea that he was excited about.
“Do you know that Rakesh Jhunjunwala’s investment in Delta Corp was close to 400 crores a few months back. And now even when the stock has gone down by more than 60 percent, he is still holding on to it. With so much at stake, I am sure Delta corp is his high conviction stock.”
“We can’t say for sure if Delta corp is his high conviction stock,” I said. “He has many other stocks in his portfolio.”
“Yes, but look at the size of his investment. Four hundred crores is not a small amount.” My friend reasoned.
I could not find a convincing answer to counter my friend’s argument at that time but I kept thinking about it. This post is my attempt to answer my friend and offer some insights on how to think more rigorously before deciding to copy other successful investors.
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