Study SEC ’13F’ filings to review investment managers

Study SEC ’13F’ filings to review investment managers

We love our crime and detective stories. The “CSI,” “NCIS,” and “Law & Order” franchises are extremely popular, and whenever I’m at the gym, it’s a guarantee that an episode from one of these shows is on a television visible from my routine.

The work of TV special agents, forensic experts, detectives and prosecutors looks extremely exciting. However, the reality is that a lot of legwork and fatigue is often involved in solving cases.

Financial detectives looking at public company filings have the same experience. They can reveal important information, sure, but it takes work. I have to admit, however, that one form of inquiry – 13F – can be quite interesting. You can look them up using the SEC’s EDGAR database (sec.gov/edgar).

The 13F is filed quarterly by institutional investment managers who have at least $100 million in assets under management. This group includes insurance companies, hedge funds, pension funds, mutual funds, registered investment advisors and others. Intended to provide transparency into the holdings of large investors, a 13F includes the shares held by the institution, as well as the size of those shares.

For investors who want to know which horses the pundits are backing, this is a good starting point. Some Main Street investors have a theory that if they know what highly trained professionals are doing, they can mimic their portfolio and make huge profits. They can also compare quarterly 13Fs and note not only new holdings, but also whether managers trimmed existing positions.

I know professional investment managers who comb their peers’ files, but you have to be careful not to draw too many conclusions from the 13F. First of all, there is a significant time lag between when the possession picture is taken and when you have access to it. Managers have up to 45 days after the end of a quarter to file their 13Fs.

So if a stock purchase was made on April 1, for example, you might not find out about it until mid-August or so. A lot can change in the market during that time. For all you know, the manager could have sold the entire stock in July.

Another major issue is that you don’t know why the manager holds the shares. Trading based on a 13F is like flying blind. If you don’t know why you are buying or selling a stock, I would suggest that you are exposing yourself to unnecessary risk.

These issues aside, I believe the 13F is an interesting document. Although mutual funds and some other institutional investors regularly report their holdings, the document can provide a more complete picture of their philosophy.

You can use 13F as a source of ideas as well. Most institutional investors own lots of stocks you’ve heard of—Apple, Meta, Alphabet, and so on—but I’m constantly surprised by properties I know nothing about. When a stock shows up on a 13F that has interesting fundamentals, that’s when the real detective work begins.

Evan R. Guido is the founder of Aksala Wealth Advisors LLC, a member of the 2018 Forbes Next Generation Advisors list and Financial Professional at Avantax Investment ServicesSM. Evan leads a team of retirement transition strategists for clients who consider themselves The Millionaire Next Door. He can be reached at 941-500-5122 or [email protected]. Read more of his insights at heraldtribune.com/business. Securities offered through Avantax Investment ServicesSM, member FINRA, SIPC. Investment advisory services provided through Avantax Advisory ServicesSM, insurance services provided through an insurance agency affiliated with Avantax. 6260 Lake Osprey Drive, Lakewood Ranch, FL 34240.

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