For me, the approach that seems to make sense is thinking more about the "nature" of an opportunity more so than being diversified. Excessive diversification is not for me, but having at least 7-8 issues helps one sleep better at night (and prevents getting wiped out). The level of your research/conviction IMO should be one of the primary considerations in allocating capital to a position. A consideration of the general level of the market is also helpful. When personal research/study leads to a high conviction and the general market is low as indicated by rational measures, then taking significant positions often makes a lot of sense. When the general market is high and there is also high conviction, taking a decent sized (but not outsized position, say < 10%) is probably the more prudent move.
Obviously, this "personal conviction" should come from getting a large NAV discount when the investment is made in the first place. And this conviction should be based on a strong consideration of what the past has looked like business wise over a long time frame (e.g. look at earnings for years before COVID and then normalize for COVID bumps). The "future" (which no one is ever truly certain of) IMO should not be the entire basis of an investment. Consider the future, but really look at the past before doing anything.
Also helps to not feel the need to be fully invested all the time. Being antsy and wanting to always allocate cash has been a source of many investment mistakes on my end. Cash is an actual position. It can really hold up performance when things are blowing up in the economy. And it also provides dry powder to take advantage of opportunities when most are cash poor.
