You’ve decided that investing is a great way to grow your wealth and can’t wait to get started. After setting up the brokerage accounts, you’re stuck with the million dollar question – which stock do I invest in?
If you do a web search, you’ll find that there are many ways to pick stocks. Dr Wealth has many investing guides that you can read and learn from too.
But learning to pick stock is a lifelong process. Where can you start while you’re learning?
What if I told you there’s a resource that reveals what the top fund managers and institutional investment managers are buying in recent quarters? The best part? It’s available publicly, for free!
Yes, its the SEC’s Form 13F!
I’ll share all about the 13F in this quick guide, and give you some tips to use it to find out where the smart money is investing now.
What is a 13F?
Form 13F is a compulsory filing that any investment institution managing US$100 million or more have to submit every quarter. In it, institutional investment managers will have to disclose the following details:
- What they bought this quarter
- No. of shares held as of the latest quarters
- Total market value of their portfolio
Do note that information in the 13F filing is limited to long positions made on stocks, American Depositary Receipts (ADRs), and convertible notes listed on the US exchange. It also includes put and call options. If you’re looking for overseas stocks to invest in, the 13F will not be useful for you.
Where to find official Form 13F?
As mentioned above, form 13F are made public by the Securities and Exchange Commission (SEC). You can access them via the:
SEC EDGAR
The SEC maintains a database called EDGAR (Electronic Data Gathering, Analysis and Retrieval) that includes all public companies’ filings as well as institutional investment managers’ filings.
You can simply search the database for a fund to access its 13f filing.
How to use the Form 13F to hunt for investment ideas?
Now that you know what the Form 13f is, you should know the power of having access to them.
Yes, you can use the Form 13F to find out what the institutional investors (aka smart money) are buying!
Although the 13F is only updated once every quarter, most institutional investors do not buy and sell too frequently. Hence, if you’re a long term investor looking for the best stocks to invest in, the form 13F is a good place to start.
That said, not all funds are equal.
For a start, here are:
Popular funds that you might want to watch
- Warren Buffett: Berkshire Hathaway
- Charlie Munger: Daily Journal Corp
- Bill Ackman: Pershing Square Capital Management
- Seth Klarman: Baupost Group
- George Soros: Soros Fund Management
- Steve Cohen: Point72 Asset Management
But wait, there’s more!
Before you go on your way to start picking stocks, there’re some pitfalls that you must know if you’re using the 13F to look for investment ideas!
Why you should take details in the Form 13F with a pinch of salt?
While the Form 13F is a great place to start hunting for investment ideas, you should take the information with a pinch of salt and do your own due diligence before you invest in anything.
Here’s why.
1) Delayed information
Institutional investment managers are only required to file their Form 13F 45 days after the quarter ends. Many of them will submit their 13F close to the submission date as they do not wish to reveal their transactions to the public too early.
2) Incomplete information
With the Form 13F, you’ll be able to see the buy transactions clearly. However, you will not have access to the sell side transactions.
You can still roughly tell when a fund sold their shares. These can still be picked up if you track the number of shareholdings and portfolio value of the fund each quarter. You can use websites like Dataroma, Hedge Follow and Whalewisdom to get some historical data.
However, there are fund that make most of their profits from short selling only, and these information may not be available in the 13F, especially if they do not make a long position on the same stocks.
Hence, it is safer to use the 13f to find long term investment ideas by following only fund managers who are known for avoiding short selling.
I hope this article has given you sufficient understanding of the 13f to help you start your investment journey. Good luck in your investing!
