Whitney Tilson: Concentrate that portfolio

There's a wide diversity of opinion on portfolio concentration versus diversification. Few, of course, would argue for the extremes: owning only one or two stocks invites potential disaster (ask those whose entire retirement portfolio consisted of Lucent or Enron stock), while owning hundreds makes it very difficult to outperform the market.

Warren Buffett, who often held fewer than 10 stocks in his partnership before he took over Berkshire Hathaway, has always been an articulate proponent of concentration, arguing that because truly superior ideas are few and far between, the impact of owning them should not be diluted by ideas that are anything less than superior.

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