Value Investing
Value Investing · Buffett
Buffett never writes the formula, yet takes Kelly-style concentrated bets to the extreme: heavy into American Express in the 1963 crisis, Coca-Cola, Apple. Munger: 'if you see four stocks clearly, put your money in those four.'
The other face of Kelly is 'high conviction = large position'. Academia tells you to hold 50 stocks — that's for people who don't know what they're doing. When you see a few opportunities clearly, concentration is Kelly-optimal — provided you estimate honestly and leave room for error.
"Concentrated investing is smarter than diversification — high conviction, big position, exactly what Kelly tells you."
That's why real value investors are extraordinarily patient: most of the time there's no good opportunity, so they do nothing; when one truly arrives, they strike hard.