Why is Cable Car’s portfolio concentrated?

Cable Car recognizes the limits of a single portfolio manager’s time and attention, and it believes that over-diversification limits the benefits of active management. Cable Car’s fiftieth best idea is unlikely to have as attractive a risk/return profile as its best idea. Cable Car’s portfolio is typically composed of 5-10 long positions and 10-15 short positions.

Concentration means that each individual position has a significant impact on the value of the overall portfolio, whether positive or negative. In recognition of the fact that any investment may not perform as expected, Cable Car has nevertheless established 30% of net liquidation value for a long and 15% of net liquidation value for a short as the maximum size for any one position.

Posted in: Individual investors