There is a place on the internet where you can get a detailed portfolio snapshot of the world’s greatest investors, all regularly and for free. These documents are called a 13F filing, and they are found at SEC.gov.
Using the 13F filing is easy and free, so you can find what some companies your favorite investors or fund managers are buying or selling. The 13F is a fantastic source of investment ideas, and did I mention all for free?
We can use the 13F as a source of investment ideas as well as portfolio construction. Using these filings helps you see what kinds of concentrations our gurus are allocating, as well as what kind of prices they are purchasing their companies.
I have used these filings to help me find some great investment ideas from the likes of Monish Pabrai, Warren Buffett, Guy Spier, Charlie Munger, and many more.
In today’s article, we will discover how to find these 13F filings, in addition to how to use that information for your investment ideas; also, we will discover the power of cloning these investments.
What are 13F Filings?
What is a 13F filing, you ask? Well, according to Investopedia:
“SEC Form 13F is a quarterly report that is filed by institutional investment managers with at least $100 million in equity assets under management. It discloses their U.S. equity holdings to the Securities and Exchange Commission (SEC) and provides insights into what the smart money is doing.”
According to the SEC.gov website:
“In general, an institutional investment manager is: (1) an entity that invests in, or buys and sells, securities for its account; or (2) a natural person or an entity that exercises investment discretion over the account of any other natural person or entity. Institutional investment managers can include investment advisers, banks, insurance companies, broker-dealers, pension funds, and corporations.
Form 13F is required to be filed within 45 days of the end of a calendar quarter. The Form 13F report requires disclosure of the name of the institutional investment manager that files the report, and, with respect to each section 13(f) security over which it exercises investment discretion, the name and class, the CUSIP number, the number of shares as of the end of the calendar quarter for which the report is filed, and the total market value.
The securities that institutional investment managers must report on Form 13F are “section 13(f) securities.” Section 13(f) securities generally include equity securities that trade on an exchange (including the Nasdaq National Market System), certain equity options and warrants, shares of closed-end investment companies, and certain convertible debt securities. The shares of open-end investment companies (i.e., mutual funds) are not Section 13(f) securities.”
A few key takeaways from all that info from above:
- All investors with portfolios over $100 million must file a 13F filing with the SEC
- It must be filed 45 days after the end of a calendar quarter.
- All securities they purchase must be listed, including stocks, bonds, warrants, and the number of shares purchased.
All this is useful information for us; it enables us to see exactly what our gurus are buying or selling and at what prices.
How Do I Find 13F Filings?
Now we understand what a 13F filings, so how do we find them?
The first step is to locate the name of the fund or management company. For example, if you go to SEC.gov and type in “Warren Buffett,” you will find nothing.
What we need to do is to do a little research before going to the SEC website; my suggestion is to use our old friend, Google. For the best-known managers, the fund and management companies are going to be relatively easy to find by doing a Google search.
For example, Mohnish Pabrai, one of my favorites, his management company is Pabrai Investment Funds, which was found by typing in his name plus management company.
Another example would be everybody’s favorite investor, Warren Buffett. If you search for Berkshire Hathaway, Buffett’s company, you get four different companies, and three of the names contain “Berkshire Hathaway,” the right one is Berkshire Hathaway Inc.
Once we have the name of the fund or management company, we enter that info on the SEC.gov page and the search query; we will get the listing of all the forms that the asset manager has filed.
Once we click the company filings page, we will go to the EDGAR company filings page, where we will type in either the ticker symbol or the company name.
Once we type in the company name or symbol, it will take us to the next page, where we will pick out the company we are trying to find.
Once we have our company, click on the highlighted link to take us to the filings page, which will list everything from 10-q, 10-k, 8-k, and so on.
The one we are looking for is 13F-HR.
Now we are here, let’s click on the documents page and see what it reveals.
The highlighted document is the one we are looking for; it reveals all the stocks that Buffett currently holds.
The above picture is a small snapshot of all the holdings that Buffett has; it contains every stock he currently holds plus lots of other information such as how many shares, what the value is of the purchase, and more.
We will dive into those elements in the next section. For now, I hope you feel confident that you can locate the 13F filing for your favorite investors.
How to Read 13F Filings?
Now that we have a handle on what the 13F is and how to find let’s dive into what kind of info we can extract from them.
Let’s take a closer look at the 13F of Mohnish Pabrai and his fund, Dalal Street, LLC.
Pabrai’s portfolio is extremely concentrated here in the US; he does have investments overseas, particularly India, South Korea, and Japan. But those don’t follow our guidelines for reporting so that we will concentrate on his US portfolio.
Ok, let’s break this down a little bit. First, notice that there are different columns listed here. The ones we will focus on are columns 1, 4 and 5. These contain the info that we need the most; column 3 has some value as well in that it functions as a bar code for security identification. The CUSIP identifies all registered US publicly traded companies and all US government and municipal bonds.
Moving to column 1, we see that it lists the security that has been purchased or sold. In other 13F filings, you will notice other listings of the same security; this indicates additional purchases of that particular security through the years.
As we will see with other 13F filings, there will sometimes be multiple purchases of the same security over the years. For example, Warren Buffett has bought American Express multiple times over the years.
Looking at column 4 next, we see the common value x $1000; this helps us see how much for that particular security was paid, to calculate the price paid you multiply the listed value times $1000.
For example, Fiat Chrysler, we take the listed value 113,409 and multiply that by $1000 for a value of $113,409,000. That’s pretty simple and notice that we are not talking about chump change here.
Finally, looking at column five, we see that it lists the number of shares purchased for that security.
Now that we have all this information, we can determine the price paid for that particular security during the time of this 13F.
Using Fiat Chrysler again, we take the total price paid from earlier of $113,409,000, and now we divide that by the total shares purchased of 8,757,463.
Once we perform this calculation, we see that Mohnish paid $12.95 per share. To take it a step further, we can then compare this to the current price to see if this might be undervalued or a deal even now.
Looking at gurufocus.com, I can see that the current market price of Fiat Chrysler is $15.58.
Now, what does this tell us? It tells us that Mohnish bought Fiat Chrysler at a lower price and has continued to hold it even with the death of its CEO recently.
Does this mean that it is a good investment right now? That is not a question that is easily answered as we still need to do our due diligence before diving into buying this company.
Please never, ever purchase a company based solely on the information discovered on a 13F filing. As with any screening tool, we must do our work before making a purchase; otherwise, we run the risk of making a very bad decision and losing our shirt.
The Value of 13F Filings
Now that we have seen how to find a 13F, and what information it contains, why would we want to go to this effort?
Several reasons pop to mind:
- It is a fantastic learning tool; you can learn a great deal by studying the investment portfolios of our gurus. If you follow the 13F filing of your favorite managers regularly (every quarter), you will see how their holdings change from quarter to quarter and how their strategy has changed during the past quarter. For example, when you see the positions in bank stocks held by a fund tripled in the past quarter, you can conclude that the manager got quite bullish on banks.
- 13F filings are a great source of investment ideas; by observing is what the greats are buying or selling, you can find ideas to develop on your own. Are you going to find your next great investment idea? Maybe, and that is enough to turn over that rock to find out.
Are there possible negatives of the following 13Fs? Oh, absolutely! The number one drawback is that the information is dated because all 13Fs are filed 45 days after the start of a new quarter.
So the usefulness of the 13F form for your trading and decision making is limited by the significant lag between the fund manager making a trade and the trade being reflected in the report.
Form 13F shows holdings at the end of each quarter, but it is published at the SEC website several weeks later – around the middle of the following quarter. Therefore, when, for example, Warren Buffett doubles his position in WFC in October, you have a chance to know that only by mid-February – and by this time Buffett might have already sold the position. There is a big lag, and you should not hope that merely buying the stocks the big smart guys file in their 13F will make you money, this is the biggest possible risk.
But is there another benefit? As a matter of fact, yes there is. Studies have shown that shamelessly cloning the portfolios of the investing greats can be quite successful.
Based on the great book by Meb Faber, Invest with the House, there are some great case studies that show that cloning portfolios can be a great way to invest. And best of all it is all free, with the elimination of commission fees, and Meb’s book is free too!
We will delve much deeper into the cloning system in my next article, but for now let’s take a look at Buffett’s portfolio with Berkshire and use some data from Meb’s book to tell us a story.
Meb uses the period of 2000 to 2014 as a sample to compare Berkshire’s performance compared to the S&P 500 as a benchmark. Over that period, Berkshire beat the S&P by quite a bit:
- Clone portfolio 10.53%
- S&P 500 4.31%
So, that is quite the outperformance! Just by buying the companies that Buffett has bought, you are creating your hedge fund, and in today’s no-fee environment that is a huge advantage.
What stocks does Buffett own:
One of the tricks to applying this technique is to clone long-only fund managers like Buffett, Munger, Pabrai, etc. If the fund manager is constantly buying or selling positions this will be much more difficult because the information will be too stale for us to use.
What Faber does to replicate the portfolio is that he takes the ten largest positions, and he equal weights them with 10 percent with each stock. You can also use the weighting that the fund manager uses, as well. Every quarter he reads the 13F filing and rebalances as needed. Either adding or deleting positions as they happen.
Determining portfolio weighting can be a lot of work to do for yourself, but you are in luck because there are multiple websites that do all this work for us, deciphering the 13F filings and listing all the securities held and their weighting.
Several of the websites you can use to help you with your cloning portfolios:
Both of these sites provide all the information you need to help you determine if this is a strategy that you want to try. And best of all, they are free!
The 13F filings are a fantastic source of investment ideas; they are fairly easy to locate and find what information is listed on them. The biggest trick is locating the fund managers’ company to enter.
As we discovered, the 13F can be a rich source of investment ideas, and the best part is they are free and easy to access.
Additionally we discovered some other potential benefits to using this information.
Cloning our favorite gurus can be a profitable exercise, as we have seen with the brief look at what Meb Faber had presented. Also, Mohnish Pabrai, on his wonderful blog, Chai with Pabrai has tackled this topic as well.
As always, I appreciate you taking the time to read this article, and I hope you found some value to help you with your investing journey.
If you have any questions, concerns, or comments please don’t hesitate to reach out.