Portfolio concentration is a high risk, high return strategy. I know of one fund available to institutional investors that does not like to hold more than 10 stocks. They feel they can add value by finding the stocks with the highest prospect for out performing the market. They dedicate much time and effort to bottom up security analysis. They have been successful adding alpha for their clients for a long time. So, there is at least one firm that is successful persuing that strategy.
Many funds pursue a sector rotation strategy. They agree with Lynn that at times individual sectors will out perform the broader market. Some of these funds have a pretty good track record. Having your portfolio in a few sectors you feel will out perform AND rotating these sectors as the market moves through a business cycle can be a successful investment strategy.
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