I think that any fundamental oriented stock investor should care about tracking what top institutions have been buying or selling in the past quarters. Exactly 45 days after the end of each quarter every hedge fund must fill the 13F form where each fund details its long portfolio holdings. I point several reasons to track these holdings:
First of all, top hedge funds have more resources than individual investors to analyze fundamentals. These institutions have a team of analysts that spend the whole day calling companies, doing surveys and reading every fundamental analysis they can find from each company they focus on researching. In other words, hedge funds in general have way much more resources and information than the average individual investor to analyze fundamentals. So, if I focus on the best picks from the best managers, I can end gettin a list of stocks that I assume that have been properly analyzed by a whole team of expert fundamental analysts that have more time and resources than me. There are clear examples on the type of research these funds are able to pursue. For example, in the First Quarter letter to investors top hedge fund manager Daniel Loeb explained his thesis on why he liked Portuguese bonds. In that letter he mentioned that the fund sent to Portugal a whole team of analysts to interview Portugal government representatives and several top consultants. I wonder if any individual investor has the ability to spend months in Portugal analyzing bonds. Third Point letter to investors was released in the web in May. Those bonds went up almost 25% after the release and every individual investor had the opportunity to invest at similar prices that Third Point did. Other example comes from the recent letter to investors from Greenlight Capital. In it, David Einhorn explained that in order to short Chipotle, they have interviewed lots of customers, did in-store research and analyzed every fundamental aspect about the company. Would you consider this stock to be long knowing in advance that Greenlight top fundamental analyst team considers the company to be a strong short ? Is your fundamental analysis capability better than them ?
Also, I like to track hedge funds holdings because their purchases are not made for just one day or week. Great value managers buy stocks and hold them for months or even years. While they report the portfolios with a delay of 45 days, fundamentals about those selected companies may not have changed from the last day that the manager reported its holdings. Considering that the manager made the purchase with the goal of holding for the long term, 45 days could not be too much in the overall fundamental picture.
I focus on tracking these hedge funds:
- Berkshire Hathway (not a hedge fund)
- Fairhole (Mutual fund)
- Fidelity Contra (Mutual fund)
- Blue Ridge
- Greenlight Capital
- Third Point
- Lone Pine
- Carl Icahn
- Pershing Square
- Leon Cooperman’s Omega Advisors
I use several websites to track hedge fund holdings:
GuruFocus hosts numerous value screeners and research tools, and regularly publishes articles about value investing strategies and ideas. GuruFocus also publishes three newsletters: Monthly Ben Graham Net-Net, Buffett-Munger Best Bargains and Microcap Magic Formula Stocks.
Whalewisdom provides a suit of tools to help track the performance of hedge funds by tracking its 13F fillings. By using Whalewisdom you can compare filer holdings from different periods, build your own portfolio of the top stocks held by your favorite hedge funds and backtest the performance and many other tools both free and premium.
Insider Monkey uses a hybrid evaluation system that exploits insider transactions and other market anomalies to reduce the number of insiders who are worthy enough to monkey. Insider Monkey also provides high quality evidence based articles to inform individual investors about the intricacies of investing
Tickerspy helps investors track their investments and stocks of interest. Registered members can also use tickerspy to save articles, create multiple portfolios, and track the ideas of our top-rated members. Tickerspy also lets members share their investing analysis with the community and respond to one another’s ideas as well.