Concentrated Investments that Win

Concentrated Investment Approach Builds Wealth

A concentrated investment strategy means placing larger bets on fewer assets, often five to ten positions—or even fewer. The goal is not to eliminate risk, but to intentionally take intelligent, calculated risks on investments that you believe can outperform the broader market over time.

But not all investments are well-suited for a concentrated portfolio. Since you're putting more capital into fewer ideas, you need high-conviction opportunities with strong fundamentals and outsized potential. Here’s what typically performs best in a concentrated investment strategy—and why.

1. High-Quality Compounders

These are businesses that generate strong cash flows, earn high returns on capital, and have long-term growth potential. Think companies like:

• Apple (AAPL)

• Visa (V)

• Costco (COST)

• Microsoft (MSFT)

Why they work:High-quality compounders can grow revenue, earnings, and free cash flow consistently year after year. Their business models are durable, they benefit from network effects or pricing power, and they often operate in markets with massive tailwinds.

In a concentrated portfolio, these provide both resilience and upside, especially if held for the long term.

2. Disruptive Innovators

These are companies changing the way the world works—pioneering new industries or radically improving existing ones. Classic examples include:

• Nvidia (NVDA) – AI and GPU dominance

• Tesla (TSLA) – EV and energy innovation

• Shopify (SHOP) – E-commerce infrastructure

Why they work:Disruptors can create exponential value as they reshape markets. If you identify them early (before their narrative is fully priced in), they can deliver asymmetric returns—the kind that a diversified index fund simply can’t replicate.

Of course, they come with risk. Not all disruptors succeed. But in a concentrated approach, even one breakout can multiply your entire portfolio.

3. Founder-Led Companies

Founder-CEOs tend to be long-term thinkers, focused on mission, culture, and innovation. Companies with visionary founders at the helm often outperform because they prioritize value creation over short-term earnings beats.

Examples include:

• Amazon (Jeff Bezos)

• Meta (Mark Zuckerberg)

• Palantir (Alex Karp)

Why they work:Founder-led companies often take bigger swings, reinvest aggressively, and resist pressure to cater to Wall Street. In a concentrated portfolio, alignment between leadership and shareholders is a powerful edge.

4. Undervalued Turnarounds or Special Situations

Sometimes the best concentrated bets are hiding in plain sight: unloved or misunderstood businesses poised for a rebound.

Examples:

• A company with a strong balance sheet trading below intrinsic value

• A business undergoing restructuring or a spinoff

• Cyclical stocks near the bottom of their cycle

Why they work:If you do your homework and spot a turnaround early, the re-rating of the stock can deliver rapid, outsized returns. But timing and patience are critical—these investments require deep analysis and conviction.

5. Niche Market Leaders

Small- and mid-cap companies that dominate a niche market can outperform significantly. These aren’t household names, but they own their domain with little competition.

Examples:

• A software company with 80% market share in a specific B2B industry

• A logistics company with regional dominance

• A specialty medical device company with FDA approval and no direct competitors

Why they work:These companies fly under the radar of institutional investors, leaving room for mispricing and alpha generation. In a concentrated approach, they add unique exposure without being redundant to mega-cap holdings.

What to Avoid in a Concentrated Portfolio

Just as important as knowing what works is knowing what to avoid:

• Highly correlated positions: Five tech stocks isn’t real diversification within a concentrated strategy.

• Low-conviction picks: If you wouldn’t be thrilled to double down during a crash, it doesn’t belong.

• Heavily speculative plays: Avoid penny stocks, unproven crypto, or anything driven purely by hype unless you’re truly an expert.

Final Thoughts

A concentrated portfolio is like a handpicked team—you only choose the best, most reliable players. The investments that work best in this strategy are:

• Durable, high-quality businesses

• Innovative disruptors with long runways

• Deeply undervalued or mispriced assets

• Companies led by visionary founders

• Niche dominators with strong competitive moats

When executed with discipline and research, a concentrated approach can dramatically accelerate wealth creation—especially in the early decades of your investing life.

The key: Know what you own. Know why you own it. And be ready to hold through the noise.

Disclaimer: This is for informational purposes only and not financial advice. Investing involves risk, including the loss of principal. Always consult with a financial professional before making investment decisions.