There are very few good ideas in any given year--Warren Buffett has said he's happy to have even one. For the rest of us (ie. those without the need to invest several billion dollars to make a difference in their portfolios), there may around half a dozen good ideas a year.Larson says that there is a dosage effect regarding portfolio diversity. Diversity is important to have, but too much can also dilute best ideas and excess returns. It can actually be safer to have fewer baskets if it affords a much-closer watching of the eggs. He says that the greater the payoff odds (lower price/fair value ratio), the greater the weight a position should be in a portfolio, all else equal. Likewise, the greater the confidence in one’s projections, the greater the position size should be, all else equal.
Just ensure that your positions qualify on these fronts:
Companies with moats - wide and narrow, which will increase in intrinsic value over time;
Bought at a significant discount to fair value (a margin of safety);
A time horizon of at least 3-5 years on each pick. It may take this long (or longer) for the market to recognise the value of a company.