A Portfolio Warren Buffett Would Love - Interview with Bruce Berkowitz

Bruce BerkowitzBruce Berkowitz recently spoke with U.S. News about why diversification is overrated, how volatility is opportunity, and whether Sears Holdings can be the next Berkshire Hathaway. Excerpts:

How does this investment approach differ from others?

In business school, you're taught that diversification is very important. But really, when you think about it, diversification has to do more with ignorance. If you are highly confident in your top five positions, why should you put more in your 10th position if you could put more in your best idea? Secondly, business schools teach that risk is volatility. We think volatility is opportunity. For example, if you follow the business school formula, when something goes down 50 percent in price, it's considered riskier. Personally, I would say it's considered safer—you're paying half.

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