At any one point in time, there is only a handful of companies worth owning. Because a value investor spends months, sometimes years researching his or her next buy, and then only buys that stock when the numbers add up, it makes sense to buy as much of that stock as possible.

"Diversification is protection against ignorance" advises Warren Buffett. "It's a confession you don't know what you're doing". There are not that many wonderful businesses and diversifying into mediocre companies will result in similar returns. Why diversify into a 30th or 35th business rather than simply adding to your top choices? A focused portfolio of exceptional businesses provides sufficient diversification. The professional investor will make and preserve significantly more wealth by concentrating on his or her top picks.

Risk is reduced by only investing in businesses you thoroughly understand, and whose progress you can monitor closely.

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