How to Trade Like a Pro: The 13F Form

The 13F Form, What it is and how to use it

Written by: Zack | zack@randomstock.net




Key Points

  • 13F form available on SEC website
  • Lists all long positions of Hedge Funds with Assets Under Management > 100M
  • Cloning hedge funds shown to give excellent returns


What is the 13F?

The 13F form is a form that hedge funds with assets under management greater than 100M are required to file with the SEC. The 13F was designed to give investors an understanding of how hedge funds are managing their money. However, we can use the 13F to reap some benefits without committing to any major funds. Here's how:



Locate The Company on the SEC Website

Pick a fund or fund manager you are interested in, for the purposes of this demonstration I'm going to pick Warren Buffet and Berkshire Hathaway. So I'll navigate over to the SEC website and type in "BerkShire Hathaway" in the company lookup.



Find the Latest 13F Form

Scroll down through all the filings until you find the latest 13F filing. There could be a lot of filings, so you may have to look closely.



Click on the Information Table

Click on the information table for the 13F form



All the Long Positions are Displayed!

As you can see below in column 1, all the companies that Berkshire Hathaway holds are listed. Some of the companies may show up more than once, that just means that they were bought at different times. For example Warren Buffet may have decided he wanted to buy some Amazon stock, so he did, but then the price fell even further and he decided to buy even more! This would show up as two separate rows in the 13F.



Column 4 and Column 5: The Important Stuff

So, here's the real information that we are looking for. Column 5 contains the number of shares (sh) purchased in the transaction and column 4 contains the amount (times 1000) that were paid for those shares. So let's look at Berkshire Hathaway's first listed Amazon purchase as an example. So in column 5 we see that 419,500 shares were purchased. Then we look in column 4 and see that the total cost of the shares was 1,157,325,000. As you can see I remembered to multiply the listed number by 1000. This gives a share price (price/shares) of 2,758.82. I'm looking today (9/30/2020) and I see AMZN is listed at $3,205 so Berkshire Hathaway is doing quite well on this trade so far.





Summary

As you can see, if you kept up with a certain manager you could piggy back off of their trades. These big funds have massive resources at their disposal and can do a lot more market research than the average person can do. A word of warning though, these big funds are very risky, they are not like index funds and their managers will probably be personally fine even if their fund takes a big dive. Invest with caution! Also, try to find managers who like taking long positions, short positions do not show up on 13F forms, so short selling managers (David Einhorn, etc) are probably not the best to follow with the 13F.

-Zack

Please Note! These are my opinions! and should not be considered financial advice. Please do your own due diligence before investing.