Philosophiesofthegeneralandbiotechportfolios

Interestingly, the two portfolios could not be more different in philosophy. The general portfolio contains a small sprinkling of ultra-speculative stocks, which should make up only a minor part of anyone's portfolio, if at all. I've always had a soft spot for penny stocks and have experienced some amazing success by dabbling in the rubbish bin.

Most of the general stocks are comprised of successful mainstream companies in sectors I favor. I also try to pick up a few emerging companies that I believe could become future growth leaders. Essentially, the general portfolio serves as a bastion of stability, but I am still striving to outperform the general averages through superior stock picking and sector weighting. As Charlie Munger said, broad diversification is a great approach if you don’t know much about investing.

The biotech portfolio is based on the belief that Big Pharma, with its substantial capital, must deploy this capital to early-stage innovative biotech firms to replenish their patent portfolios, as many of their existing products face patent cliffs. In the past, large companies could wait until these firms reached Phase 3 trials with imminent success before making a takeover bid. Today, the market for these potentially game-changing companies is much more competitive. Srishti and I scour every source we can find to bring promising stocks into the portfolio.

The overall market certainly has its dangers right now, after three solid years of outperformance. Still, if we continue to see takeovers in emerging biotech, we hope there will be a relative floor under this sector. Of course, no one can guarantee that takeovers will continue, but we like the odds.