I Reverse-Engineered 30 Years of Berkshire's Portfolio. The Position Sizing Data Will Shock Most Investors.
The mathematical patterns behind history's greatest wealth creation machine
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I tracked every single Berkshire Hathaway 13F filing from 1995 to 2024.
Every position.
Every size.
Every entry and exit.
What I found wasn't just a list of great stocks.
It was a masterclass in position sizing psychology that nobody talks about.
The data revealed three shocking patterns about how Buffett actually builds portfolios.
But more importantly, these patterns completely contradict what most people think they know about "Buffett-style" investing.
The 5-Stock Rule That Built $900 Billion
Here's the number that will surprise most people:
At any given time, Berkshire's top 5 positions typically represent 65-75% of the entire equity portfolio.
Not 40%.
Not 50%.
Around seventy percent.
Let me put this in perspective with approximate data:
2024: Top 5 positions ≈ 72% of portfolio
2015: Top 5 positions ≈ 68% of portfolio
2005: Top 5 positions ≈ 66% of portfolio
1995: Top 5 positions ≈ 71% of portfolio
This concentration level has been remarkably consistent for decades.
While financial advisors typically recommend 20-30 stock diversification, Buffett has been running what amounts to a concentrated portfolio with selective diversification.
Why This Changes Everything
Most people think they're following Buffett by buying his stocks.
They're missing the most important part: the sizing.
Owning small positions in quality companies isn't the same as Buffett's approach.
The concentration in top positions?
That's where the mathematics of compounding gets interesting.
The lesson?
Position sizing can sometimes matter more than stock selection.
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The "Conviction Building" Pattern That Nobody Talks About
Here's what shocked me most about Berkshire's approach:
They almost never buy a full position immediately.
Instead, there's a consistent pattern of gradual accumulation that reveals sophisticated position-sizing psychology.
Take Apple as the perfect example:
Q1 2016: Initial purchase of ~10 million shares ($1B position - about 0.5% of portfolio)
Q2 2016: Added another ~15 million shares
Q1 2017: Major addition of ~75 million shares
Q2 2017: Another ~25 million shares
2018: Continued building to final ~250 million shares
Total timeline: Nearly 3 years to build the full position
The Conviction Building Logic
This isn't indecision - it's risk management through time.
Here's why this approach is brilliant:
Tests the thesis gradually (if the investment case breaks down, losses are limited)
Averages into the position (reduces timing risk across multiple entry points)
Allows conviction to build (each quarter of strong business performance increases confidence)
Manages opportunity cost (capital stays flexible for other opportunities during the building phase)
The Pattern Across Holdings
This isn't unique to Apple. Looking at other major positions:
Bank of America: Built over 5+ quarters starting in 2017
Chevron: Accumulated gradually through 2020-2022
Occidental Petroleum: Built methodically starting in Q1 2022
The message is clear: Even Buffett doesn't bet the farm on day one.
Most individual investors do the opposite - they buy their "max position" immediately, then have nowhere to go if the stock falls or their conviction grows.
The Exit Pattern Nobody Notices
Conventional wisdom says Buffett never sells.
The data tells a different story.
Berkshire has exited hundreds of positions since 1995.
But there's a pattern to how these exits occur that reveals sophisticated risk management:
The Three Exit Categories:
Business deterioration (IBM, General Electric)
Capital reallocation (trimming positions to fund new opportunities)
Portfolio rebalancing (managing concentration levels)
The Exit Psychology
What's sophisticated about Berkshire's exits: Complete exits rarely happen in one quarter.
Instead, there's often what appears to be "staggered liquidation":
Quarter 1: Reduce position size
Quarter 2: Further reduction
Quarter 3: Complete or near-complete exit
Why the staggered approach?
It provides flexibility to adjust the thesis. And it smooths out the impact of exiting long-term positions.
The Real Insight
After analysing 30 years of Berkshire's portfolio moves, the real insight isn't about individual stocks.
It's about portfolio construction as a dynamic process.
Buffett doesn't build portfolios.
Portfolios evolve.
The observable framework:
Start with diversification (40-55 smaller positions)
Let winners prove themselves (business performance + market recognition)
Concentrate into winners (gradually increase successful positions)
Manage concentration (rebalance when positions become oversized)
Redeploy capital (restart the cycle with new opportunities)
Why This Beats Traditional Portfolio Theory
Modern Portfolio Theory says: Diversify to reduce risk.
Berkshire's approach appears to say: Concentrate where conviction is highest, but diversify the process of building conviction.
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Applying This to Modern Investing
We recently made a concentrated bet on a stock that has become our largest position.
The company has a major catalyst event on July 24th that could significantly impact its trajectory.
Our complete updated thesis will be released to paid subscribers this Friday.
This is exactly the type of situation where understanding different position sizing approaches matters.
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Until next week,
Dom
Schwar Capital
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Disclaimer: The content provided in this newsletter is for informational purposes only and does not constitute financial, investment, or other professional advice. The opinions expressed here are those of the author and do not necessarily reflect the views of Schwar Capital. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The author may or may not hold positions in the stocks or other financial instruments mentioned. Always do your own research or consult with a qualified financial advisor before making any investment decisions.
No one talks about position sizing because it's such a difficult concept
I always add or remove to positions over time. No hard and fast rule. Example: if i have a quality company and market sentiment pushes the price down i will add to it. If I've decided to exit i will do it over a month, a little at a time.
My portfolio is obviously much smaller!
Also, i have recently started to buy a small position for watchlist companies at current prices. Say 1-10 shares. If it is in my portfolio i find psychologically I follow it closer than if on a watchlist.