Every quarter, these mysterious regulatory filings come in by the thousands. Fun fact: they can be used to unearth great stock picks.
Okay, so you're getting into investing. You’ve heard of hedge funds, billion-dollar portfolios, and Wall Street hotshots—maybe even felt a little out of the loop. But don’t worry, you’re not alone. Just like any other sport, investing can seem like an exclusive club, but with the right tools, you can absolutely level up.
So here’s the deal: on one side, you've got your local financial advisors, the "mom and pop" shops, helping regular folks manage their portfolios. On the other, you’ve got the titans of Wall Street, the hedge funds and allocators managing massive piles of money for the ultra-wealthy. But here’s the catch—unlike pro basketball, where height and a sweet jump shot will get you into the NBA, investing isn’t quite so cut and dry. It’s a mix of skill, strategy, and a little bit of luck. Think of it like poker—sometimes a novice can take down a pro with the right cards. 🏀
Ask any of the pros, though, and they’ll tell you the secret to success isn’t just about picking good stocks. It's about process. The research. The data. The late-night grind. They hire fancy-trained analysts rocking Patagucci Fleeces and Allen Edmonds Brogues, commanding high-6 figure salaries working late nights.
And that's where things get interesting.
The Big Secret: You Can See What the Pros Are Doing
For years, hedge funds operated like the Wizard of Oz—powerful, mysterious, and hidden behind a curtain. But thanks to some scandals and a rough patch where even the smartest money couldn’t beat the S&P 500, hedge funds have been forced to share a little more of their playbook.
And here’s the kicker—you can actually get access to all that expensive research and insider info, for free. How? Thanks to good ol' Uncle Sam.
Yep, the SEC (Securities and Exchange Commission) requires that anyone or anything holding more than $100 million in U.S. stocks disclose exactly what they own—every three months. This includes all the big players in the game, so when they file, you get a peek behind the curtain at their buying and selling. This magical document is called a 13F.
The Basics of a 13F (Don’t Worry, We’ll Keep It Simple)
So, what exactly is a 13F? Basically, it’s a quarterly report that details what a fund or big investor is holding. If an institution owns more than $100 million worth of U.S. stocks, they have to file one. It’s like getting a glimpse into the playbook of your opponent during halftime.
Now, here’s where things get a little wonky. Funds have up to 45 days after the end of the quarter to file their 13F, so it’s not exactly in real-time. For quick-trading funds (we’re talking milliseconds), that’s not so useful. But for long-term investors like Warren Buffett 🐐 or Bill Ackman 🎭, it’s pure gold.
The catch is, Form 13F data isn’t exactly the easiest thing to work with. It’s a relatively new dataset (only about 40 years old), and for a long time, it wasn’t available in an easy-to-read format. If you dive into the SEC’s website (called Edgar, like your fun uncle, but it really stands for Electronic Data Gathering, Analysis, and Retrieval like your boring uncle), you’re on your own. There’s no guide, no sorting by hedge funds, retirement accounts, or mom-and-pop shops.
That’s where we come in. Motu has crunched decades of 13F filings and organized them so you don’t have to sift through the mess. Our database includes over 15 million unique data points, and is analyzed through advanced AI algorithms, making it easier to track exactly what the big players are doing. 🧑🔬
But Wait, Don’t Hedge Funds Underperform the Market?
It’s true—hedge funds aren’t always outperforming the market, especially when compared to something like the QQQ. So why bother? Simple: they’re playing a different game and that game delivers killer stock picks.
To back it up, hedge funds don’t just sit around picking stocks—they’re managing risk. Their goal isn’t always to skyrocket their returns, but to create steady, positive gains in a market that’s sometimes volatile. They use strategies like (gasp) shorting to hedge their positions, which is why they’re not just chasing a high number 😱😱. They’re going for alpha—outperforming the market while managing risk. And that’s what we help you find.
How Do You Analyze a Fund with 13Fs?
Okay, so a 13F gives us a snapshot of a fund’s holdings at a given point in time, but how do we use that to judge their stock-picking abilities? It’s all about data and a little AI magic.
We don’t just look at what stocks they’re holding—we simulate how those stocks would perform if we invested in them right now. We then stitch those together over time (often decades) to get a sense for how good they are. That’s where the real fun begins. We analyze the stock picks’ alpha (outperformance) and beta (riding the market's coattails), giving us a sense of how well a fund’s strategy is actually working.
Then, we rank all of that using our proprietary SageScore and SageRank, which tells you exactly how a fund stacks up against the competition. We do all the heavy lifting so you can see which funds are really crushing it and which ones might be floundering. More importantly, we find the stocks that are driving that alpha so you can do your own dilligence on those names with a leg up.
At the end of the day, we want to make it easier for you to find the best funds and their best stocks. No need to wade through mountains of data—we’ve already done it for you. So sit back, relax, and let us help you make smarter investing decisions, just like the pros.
Stay tuned for Part 2, where we dive deeper into how you can use 13Fs to actually pick killer stocks! 💪💪💪
