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13F and 13D Reports: Why Both are Essential for Your Success



One of the best ways to following the “smart money” is to keep track of what’s known as Form 13F.  Filed within 45 days of the end of a quarter, they required full disclosure of the name of the institutional investment manager that files the report, as well as the name of the investment, the number of shares bought and total market value of the transaction.

If I wanted to know what hundreds of funds, including Warren Buffett’s Berskshire Hathaway has been busy buying, I have full access to that information.  For example, in early 2017, we learned that some of Buffett’s latest buys included stocks such as Southwest Airlines (LUV), Monsanto (MON), and Sirius XM Holdings (SIRI).

The only downfall -- by the time such information is revealed, funds may have bought and sold their positions already.  But they still offer great insight into the mindset of institutions.  For example, in the first quarter of 2016, a good number of funds had become considerably bearish on Apple (AAPL).  In fact, in that quarter, funds pulled $5.4 billion from the stock.


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To us that’s overkill. This is Apple.  By finding that $5.4 billion had been pulled, we could clearly see institutions were panicking, which allows us potentially capitalize on fear.  As you can see on the chart, Apple was a disaster that quarter.  By the time we learned of how bearish funds were the stock was already bottoming out.

Not only did Apple find double bottom support at the time, but also RSI, MACD and Williams’ %R were deep in oversold territory.  Anyone bought shares around $95 watched it balloon to $155 just months later.  Smart money or not, funds can also be some of the greatest contrarian indicators, too because they have a tendency to crowd the wrong side of the trade.

Another way to track what the “smart money” is buying is by keeping an eye on what’s known as the 13d-101, which requires funds to disclose new stock purchases that represent at least 5% of any stocks’ outstanding shares.  Unlike a 13F, a 13D must be filed 10 days after purchase, which gives us opportunity to get into a trade not long after the smart money.

For example, in mid-2016, we learned that Elliott Associates – a hedge fund management company with a string of successes at the time – just bought shares of Imperva (IMPV), a provider of cyber and data security products.  At the close of business June 27, 2016, the company owned 743,227 shares of the stock.

Their intention for buying was to simply help raise shareholder value.

By the time we learned of the news days after the initial transaction, shares traded at $41.88.  Any one that followed the fund into the trade would watch their investment move from $41.88 to $57 a share not longer after.

Does that mean we should buy every 13D filing tip?

Not at all… Such reports don’t provide the “Holy Grail.”  But what they can help expose is the potential for opportunity.  The best way to lose money from them is by blindly jumping into a stock because smart money jumped on that stock.  When you find a 13D filing, explore the stock both fundamentally and technically. See if you can find the same opportunity the smart money may have found.  And then, if all looks good, consider it.

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