The Whale University

How to invest with 13F/13D/G filings

13F filings are submitted quarterly by any manager controlling investments of at least $100 million. These managers can be private trusts, banks, insurance companies, investment advisors, and hedge funds. Funds must submit their list of qualifying 13F securities no more than 45 days after the end of quarter date.

13D/G filings are submitted by owners of more than 5% of a publicly traded security whenever a trading event occurs involving the security. Filings are usually due within 10 business days of the event. These filings are commonly used by activist investors and hedge funds when obtaining control of a company. WhaleWisdom subscribers can view current and past 13D/G filings by using the 13D/G Search page.

Individual investors can take advantage of the research already done by hedge funds by using 13F Filings

So what is a Whale in investing terms? Like their ocean counterparts, Wall Street Whales are the big movers in the market. Whales have the ability to affect stock prices through their investing decisions in ways that the "little" fish cannot. Whales use their vast resources and talent to find the best investments and market opportunities. So when we talk about Whales, we're really talking about the big hedge funds and money managers who control massive portfolios. By using the Whale's publicly disclosed holdings, private investors can emulate the Whale's portfolio and piggy-back on their knowledge and know-how.

not everybody has the research budget to hire scores of Ph.D.s

What are the limitations in 13F/13D/G investing? Qualifying assets disclosed in these filings include long positions in US equities and ADRs, call/put options, and convertible debt securities. Shorts, cash positions, foreign investments and other assets are not included. So you're potentially missing the complete picture of a fund's investment portfolio. Only the long side of a pair trades for example will show up in the filing. You could mistakenly think that holdings disclosed represent a major bet by the firm, but if that firm's primary investments are international or focused on distressed debt, then the 13F holdings may be an insignificant part of their overall portfolio.

Identifying the best funds to copy is key to 13F investing

How do you identify the best funds to copy? Despite the 45-day delay in reporting and the potential lack of full disclosure, research has shown that investing alongside a single manager or group of managers can outperform the market. The key is to identify the best and most consistent funds to copy. So what is the best way to identify funds whose 13F portfolio has the best chance of success? You can start by backtesting. Using WhaleWisdom’s custom backtester engine, you can find out what your return would have been if you had copied the top holdings reported each quarter in a fund’s 13F filing. Getting backtested performance numbers is just the first step though. Once you have a manager’s past performance, you need to adjust the returns for risk against a known benchmark. But how far back in time should you look and which risk-adjusted metrics offer the best insight into how the fund might perform in the future? Are factors such as turnover rate or percent concentration in top holdings important to consider?

Investors can take advantage of these 13F filings to create portfolios from managers that have proven past success

To help take the guesswork out of fund selection, I’ve come up with a scoring system called the WhaleScore ®. The WhaleScore lets you quickly identify which funds tend to make good candidates for replicating and whose past performance indicates a consistent track record of outperforming the market. The best of the WhaleScore filer are brought together to find the consensus picks that make up the WhaleIndex.

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