The Big Picture for the Week of November 27, 2011

Yesterday, my reading took me to a revisit of a few themes that I have written about over the years which brings up a point worth mentioning that coincidentally came up during my visit to Maryland last week. The themes in question are Scandinavian banks, Mongolia and publicly traded farming/plantation stocks.

The point here is not the content of what I read, you can find news easily enough, but is the time that goes in to the initial learning and then the ongoing monitoring of these things even if you don't own them. Learning some of the basics is not that difficult and keeping tabs on some of the bigger news items like things negative affecting fish production or the price of copper or knowing who is exposed to Hungary is also doable.

In addition to the above it is important to understand the volatility characteristics of the stock you might be most interested in but also other names, if there are any, in the space. Most of the obscure things that I have found, researched and written about have very simple supply and demand characteristics but the stock trading is far more complex meaning they tend to be wildly volatile.

In exploring themes there will be some number that you buy and some number you won't out of the total number you research. In order for the theme to be investable you need to be comfortable with both the fundamentals, how the stock trades and where it is priced. Over the years I've written about the themes we own but the above are themes we don't own. I typically say that I do expect to own them at some point which is why I continue keep tabs and continue to try to learn.

The takeaway here is that for people inclined and able to spend the time at the theme level it makes sense to expect that just as much time will be spent on what not to own. I thought this was obvious but it may not be and so it worth going over. And obviously the context is for people who prefer narrow based portfolios.

Often these posts draw comments asking why this is necessary and of course for you it may not be. A huge building block is have the type of portfolio that is right for you not for someone else. Obviously I prefer a series of small exposures to countries and themes that allow for potentially subtle tweaks to the portfolio.