13F Filings: Lessons for Investors

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IIt’s season 13F! In case you don’t know what it is, institutional investment managers with more than $100 million in assets under management are required by law to file a Form 13F with the Securities and Exchange Commission (SEC). each quarter. These filings are made public and there has been a rush of Q1 releases over the past two weeks. They detail the stock holdings of hedge funds and other fund managers, and are often said to be used to determine where so-called smart money goes. There are, however, some important terms that investors should follow when looking at what top investors are doing, according to their 13Fs.

First and foremost, they only reveal stock positions. As I’m sure everyone knows, stocks aren’t the only investment available to hedge funds today. Even the more traditional ones can hold bonds and commodities in addition to stocks, while things like crypto also offer attractive alternatives.

Still, you’d think it would be useful to know where fund managers are putting the money they allocate to stocks, but there’s another problem with relying on the 13Fs for this: they’re backward looking. They are concerned about what those funds have done in the first three months of the year, making the information at least six weeks out of date at this point. When you look at the number of changes to positions in any given quarter, it’s clear that six weeks is an eternity in this case, and the forms are a snapshot of fund managers’ views at any given time. rather than a glimpse into how they feel right now.

This is why I tend to ignore things like industry trends revealed by filings. It’s not really surprising that these releases show that a lot of money has been shifted from technology in the first three months of the year to “safer” areas of the market. If you had been paying attention to the Nasdaq during this period, you would already know this and you would have known this for a few months. stories like this from Reutersclaiming that the funds poured into Netflix and Meta during the first quarter tell us absolutely nothing useful.

There are, however, some valuable lessons that can be learned from this information.

It is telling, for example, that Warren Buffett’s Berkshire Hathaway has been very active in these first three months of the year. The Sage of Omaha often said last year that he didn’t see much value in stocks at their then levels. Obviously, however, it was about price, not fundamental value. As the markets adjusted, he and his team found plenty of places to deploy cash.

The other major lesson for investors from these deposits is that flexibility is an important part of successful investing. You’ll often hear “Big Short” type stories of fund traders who risked it all on a big play and kept the faith to the point where they were near bankruptcy…then it all turned around and they won billion!

They are good stories, but they are just that: stories. The reason you hear about them is because they are so rare. What you don’t hear so much about are guys who stubbornly stuck something in the ground and then got kicked out. I’ve met a lot of these guys in my years in the markets, and hardly any heroes who stood up.

Successful traders, both institutional and retail and in any market, know that if something doesn’t work out as expected, you’re fine. Even if you are convinced that it will come back at some point, you have to accept what the market is telling you. You must have a level at which you will sell even your most convinced positions. You can always come back later if things turn around, and you can do so more efficiently if you’ve freed up capital to make money elsewhere rather than just watching something fall and rack up the losses.

So those are the two main lessons investors are learning from these filings. Don’t hang on to losing positions but, even if you sell, understand that if the markets continue to fall overall, there will be value to be gained from the decline. It doesn’t matter which individual stocks some funds bought two months ago, but if you remember these two things, you’ll be a better and much more successful investor in the future.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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