written by reader Travis. If i were to pick 5 stocks that could possibly

By backoffice, April 5, 2018

return a decent return instead of just plucking them off a dart board, and have a decent chance of making a respectable return, what would you recommend?

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Travis Johnson, Stock Gumshoe
April 6, 2018 8:56 am

I can’t answer that question very definitively, of course — and any answer will be different given the squishiness of terms like “decent chance” and “respectable return” … but there are a couple ways to think about it.

First is that you could just look at my top five holdings — those are the stocks that, by inference, I have the most confidence in. But I don’t know what time frame you’re thinking about, and I don’t have any conviction that those five stocks will beat the market if the market surges up another 30% or something like that (though I do think they’ll do better than the market over time, and particularly if we have a bear market)… I just think they’re at least fairly valued and expect to hold them for a long time (of those top five, Fairfax and Alphabet are the two I’d be most willing to add to at current prices, Markel the least).

Or you could look at the five stocks I’ve invested in most recently — that would be Naspers, Fairfax India, Qualcomm, Boston Omaha and Okta. Those are mostly fairly small positions (Fairfax India is the largest, and still less than 2% of my portfolio).

If you want “a decent chance of making a respectable return,” the way I interpret those terms, then the best bet is to diversify and be in the right sectors… and be patient. Stock selection is less important than sector selection, and sector selection is less important than diversification and patience.

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