How enlightening would it be to see what the biggest traders are doing with their money? What they are buying or selling is an inside look at major money movement that drives markets.
The 13F required by the SEC is a look into long holdings of some of the biggest hedge fund managers. The increase or decrease in positions is a sentiment signal that outsiders look at.
The big boys (and girls) of finance are required to file forms, though the disclosed information is for long positions. Data can also be dated because the reporting period may have long passed a month and a half ago.
So called smart money trading size can be monitored by dissecting 13Fs. The rule requires institutional investment managers with 100 million dollars or more to file the form.
Unloading of Apple or building a gold position by a hedge fund can have multiple motivations. Remember, the snapshot of the portfolio is how it looked that one reporting day. The construction can change continually.
A sneak peak at a 13F can put you on the side of insiders, or at least the side they were once on.
Another caution is with only long disclosure half the position picture is incomplete. It is impossible to determine if the long play is pure and not part of a more complex derivative play.
Initiating a play to piggyback pro money has drawbacks:
- A 13F is delayed data
- Only long positions are required to be disclosed
- The big money may have cashed out
The famous fund fight in Herbalife was mainly call options for bullish bettors. That battle of big boys became personal with serious money at stake in the hundreds of millions. The 13F filings failed to fill in facts in that case.
A certain solitude can be found in aligning ideas with the biggest and often brightest. Some sleep better knowing right or wrong they are in good company.
