This is a transcript to Mark Minervini's webinar which was released in 2015. In this market environment, the rules make a whole lot of sense.
3 Keys to Superperformance
Rule 1 Concentrate - don’t diversify
Keeps things manageable
Keeps you focused
Allows you to be patient - the luxury of integrity
Focus on the very best names
Discussion: You want to be able to manage your holdings. If you have big positions, you become attentive to those. If you concentrate, and when things work, you compound very rapidly. You do not need to be in the market every time as once you start buying positions timely, you move your equity fast. Concentration also allows you to focus on the best names. An example strategy is building a 10-stock position for 10% each or 4-5 position at 25%. You can start at 5% position then if it moves and become 10%, you can add to the second base. Mark shoots for a 25% position. Starting from 5% and building from there. He does not go all-in at once. Diversification doesn't protect you, it only dilutes you.
Rule 2 Turn over your portfolio
Forget about taxes
Forget about getting the high
Forget about your ego
Nail down decent profits when you have them
Discussion: Take profits when you have them. Trim stocks that are not going well. Never think of taxes when buying and selling stocks. Ask, "is the position right to be sold, should it be sold?" It is better to pay taxes on a profit than not paying taxes on a loss. Throw your ego in the thrash can. You will be wrong. You just need to keep those losses small. Learn from your losses and winners.
Rule 3 Time your trades
Time is money
Learn how to identify a VCP (Volatility Contraction Pattern) set-up
Develop “sit-out power” - only trade proper set-ups and allow them to come to you
Discussion: You can't time the market but individual stocks can be timed very effectively. Learn the Volatility Contraction Pattern set-up. Regardless if Indexing is working, you get leverage with individual stocks. The general market can go up 20% in a bull market, you'll have individual names in twofold, 20-fold. That's a leverage factor there.
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