A net-net portfolio rule is the idea that deep-value investors should hold a basket of names rather than rely on a few individual net-nets. Graham-style investing treats diversification as protection against the fact that some statistically cheap stocks will remain cheap or deteriorate further.
Why it matters
Single-name risk is high in microcaps. Even when the odds are favorable across a basket, any individual position can fail because of dilution, weak assets, or management behavior.
Practical version
- Hold a meaningful basket rather than one or two names.
- Rebalance when discounts close or catalysts play out.
- Keep tighter sizing for illiquid names or those with financing risk.
See Diversification and Position Sizing - Graham's Guidance, Near-Low Opportunity Framework, and Margin of Safety for the practical form of this rule.