I do not like the idea of holding one or two stocks in ones portfolio. The following is my reasoning:
Last 10 years have been a boon for all types of investors: Equity, Realty, Gold and even Copper investors. In general, businesses, irrespective of their models, have blossomed.
In the period between 2000-2010 any decent company gave a positive return on investment. There was little room for mistakes. But, now one will have to be doubly sure. Tides have turned.
Now, the mode of the Money-Game has changed from easy to hard. Businesses have become tougher. Realty, Gold (and copper) are falling. Investors have not made a penny in Bluest of Blue Chips, like Infy, in the last 4 years. Forget profit, they feel threatened.
To add to their woes, US is trending towards increasing Interest Rates. This could wreak havoc of sorts.
Value Investing, as done by WB clan, is primarily about finding value: A match of price and business. With that said:
1) Currently Bhel could be as good as bet as Gruh, given its price.
2) TCS could be a sound investment at par with Gold. If Gold rises due to fall in currency then TCS is surely set to benefit as well. (WB does not support investment in Gold).
In short, if one agrees with the Value argument then diversification should naturally follow. There is no sound reason to put all eggs in one basket, where one major incidence in your company could be a calamity to your financials and has the potential to end your career as an Investor. Confidence will take a major beating after such a fiasco.
Secondly, if one argues that he is investing only the money which he can afford to lose, then he is not investing enough simply because he does not wholly trust his process of investing. Hence, he chooses to be very defensive.
Finally, I would like you to ponder on this.
HUL, recently touted as a super-hero, gave NIL returns for a decade to investors who bought the stock at Rs.300 a pop, in the year 2000. The stock only took off in 2011. That is a 10 year long wait !!
I reason it as value catching up to price. Price multiplied three times after 1996, then came the wait: a period in which price fell back to 100. No matter how good the company, the price was too much.
Lastly, when fundamentals are menacing it is logical (and crucial) to not buy any stock when its price is at all time high. You may be right about the company, but wrong about the price. Or you may be right about both but the market won't have the sentimental strength to drive the price much up (let alone 10 fold).