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How does Warren Buffett review positions in his portfolio?

It breaks down into two periods of my life: when I had more ideas than money, I was constantly reviewing my portfolio, figuring out which stock to unload to buy a new one.

Today, I have more money than ideas so we aren’t really thinking of selling when the alternative is cash. But we’re always collecting information on every company we own – it is a continuous process, but not with the idea that daily, weekly or monthly activity will result.

If we needed money for a very big deal, $20-, $30- or $40-billion, and we had to sell $10 billion in equities, we’d use information we’ve been collecting daily to decide what to sell.

Munger: Even in Warren’s early days, he wasn’t thinking about his #1 choice [his single favorite stock] – he could put that aside [because he’d never sell it].

We think about adding more to certain stocks and have done so. We add to ones that look attractive and that we can buy. If you look at the portfolio at the end of 2007 you’ll see that certain positions have been increased by billions of dollars. We like many of our positions and if they get cheap, we’ll buy more.

Sometimes there’s not enough stock or we might cross certain thresholds that cause reporting requirements or going above 10%, which triggers the short-swing rule.

Munger: It’s not as easy as it looks to buy these big positions. When we were buying Coca-Cola, we bought every share we could – we bought 30-40% of the volume, yet it still took us a long time to accumulate our position. However, we like it better when we have these problems now than when we didn’t earlier.

We usually feel we can buy 20% of the daily volume and not move the market too much. That means if we want to buy $5 billion, we have to wait for $25 billion to trade and not a lot of stocks trade that much.

Source: Berkshire Hathaway Annual Meeting
Time: 2007

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