Like millions of other investors, I anxiously awaited the 13F filing deadline on the 15th. I could not wait to dig into the databases and see what the best fund manager and investors were doing with their cash.
OK, that’s not completely true.
I did that because I do it every quarter – and have been since the early 1990s. I spend a lot of time and money figuring out who is buying what.
More importantly, I use raw SEC data and several databases to determine who the best investors to look at are, across various time frames.
I use the stocks that the very best investors buy as a starting point and run them through my empirically tested and proven systems.
I also set up clone portfolios of the best investors that have delivered spectacular long-term results.
I do all of that.
But millions of other investors did not. They tend to ignore the filings.
Their loss, quite literally. Let me show you why…
Other investors may read a few headlines about Warren Buffett and what Berkshire was buying.
There will be a few headlines about what some better-known investors buy.
Most investors will read all that over and do little to nothing with the information.
Except for the Buffettologists. These are the folks who get up at 5 am on the day the Berkshire Hathaway (BRK) shareholder letter is filed at the SEC and endlessly hit refresh on their browsers until it magically appears.
These folks will buy everything Berkshire did and sell everything Berkshire sold and continue to stake their claim as members of the High Holy Church of Buffetology.
They would be better served by going back and reading Warren’s shareholder letters from 1959 to 1965 when he was still focused on getting rich (rather than staying rich).
Doing that and buying into Berkshire at 20% of the current market price the way we have done in Underground Income makes more sense than buying the stock picks of Berkshire today (to see how we’ve done that, click here).
To clone Warren today, you also must own one of the largest energy companies in the United States, massive insurance operations, and a host of other private businesses.
Berkshire’s actual public holdings have just done okay.
Owning Berkshire’s Public holdings since the first quarter of 2022 has slightly underperformed the S&P 500 with a return of 8.24% versus the index’s annual gain of 8.56%
Expanding to owning the top 20 holdings improved the annualized gains to 8.83%.
Just owning Berkshire produced a return of 9.73% as the private companies outperformed the public holdings.
This is not meant to demean Warren and Charlie in any way. On the contrary, besides being incredible investors, they are among the best businessmen of the last 100 years.
Today they are both in their 90s, with Charlie getting close to the century mark. They run a company worth $730 billion.
Berkshire has $150 billion in cash and fixed-income securities that need to be invested eventually.
You and I do not have the same goals or problems as Berkshire at this point.
If you are in the accumulation phase of your life, trying to build your net worth as rapidly as possible, you need to be stealing ideas from these investors with the best long-term track records.
If you are looking to exceed the stock market’s rate of return, there is little or no point in studying the buying and selling activities of investors who struggle to match the index returns.
The best investors right now are smaller investors. Most of whom you have never heard of in the media or other financial sources.
Two types of firms dominated the list of best-performing.
In spite of the near-constant reporting of the death of value by the financial media, deep-value firms have continued to be among the leaders in 10-year returns.
So do a handful of firms that invest in high-tech firms even after all the problems in technology and venture capital in the last year.
Surprisingly several bank stock activists and specialists are still high up on the leaderboards.
While there are growth stock investors who embrace the idea of fundamental momentum, I do not see any swing traders, day traders, or other short-term-focused funds on the list.
What about Stanley Druckenmiller?
After all, the Duquesne Family Office portfolio he ruins has delivered huge returns.
His turnover rate is high, but the average holding period of his biggest holding is around six months.
It is not unusual for him to hold winners for several years.
David Tepper of Appaloosa is a top performer with a reputation as a gunslinger, but his average holding period is over two years.
Investing has made far more non-professionals rich people than trading, and according ot the 13f filings, that continues to be the case today.
Next week I will break down what the top performers have been doing with investors’ cash and what lessons and ideas we can take away from their filings.