# Copying the trades of the very best.



## Banalanal (Mar 28, 2011)

What do you think of the strategy of subscribing to a site like Gurufocus? You pay a yearly fee, and get notification, within a few days, of whenever an investor(s) you track is making a trade. Why not just pick two of the best long-term value investors that are actively managing portfolios, and mimic whatever transactions they do?

The downsides are that, fundamentally, you are not learning that much about investing, and the few day lag will undoubtedly make your trades a little less profitable than theirs, but I have to think that given they are value investors and not trading that stock in a very short margin of time, that strategy has to be a good one to employ if you can stick with it. 


Thoughts?


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## andrewf (Mar 1, 2010)

Not sure how much that costs, but maybe you should check out AlphaClone first. IIRC it's pretty reasonable and tracks a bunch of hedge funds based on their regulatory filings.


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## I'm Howard (Oct 13, 2010)

Buy Berkshire Hathaway if you subscribe to that theory, personally I buy MDY and forget about it.


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## fatcat (Nov 11, 2009)

these guys allow you to do that ... https://www.wealthfront.com/

there are all kinds of strategies where you give your money to a really "hot" investor and your money mirrors his trades ..

just make sure you get out before his hot trades become cold trades ..

that's where the skill comes in ..


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## OptsyEagle (Nov 29, 2009)

First of all, most of the purchases can be found for free on that site and many others. 2ndly, you don't know why he/she is buying and selling and therefore cannot manage it properly. The delay in information of trades will be significant and for the most part meaningless.

For example; if a hedge fund manager that you admire is selling IBM, you don't know whether he/she thinks IBM is a sell ... or ... he/she is receiving X amount of redemption requests and wants to maintain their portfolio weighting. So if they have 5% in IBM and 1% of the fund is being redeemed, they will need to sell 1% of their IBM holdings to maintain their weightings, even though they still like IBM.

Don't waste your money. That is my opinion.


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## hypo (Aug 11, 2010)

> What do you think of the strategy of subscribing to a site like Gurufocus? You pay a yearly fee, and get notification, within a few days, of whenever an investor(s) you track is making a trade. Why not just pick two of the best long-term value investors that are actively managing portfolios, and mimic whatever transactions they do?


If they are a guru, this means that they are most likely handling a very large asset base. When they move in or out of a stock, the volume they command alone can artificially affect the stock price, more so the smaller market cap you go. If you make your trade several days afterwards, you could fall victim to a recently flooded or dried up market because of the actions of the market-maker.


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## Causalien (Apr 4, 2009)

Add to the fact that the large traders don't have to disclose heir shorts. Some of them are known to screw ppl who coattail them. Pick one who doesn't and pay them an advisory fee. You can only get so much for free.


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## Banalanal (Mar 28, 2011)

Back on this topic again 

I think I'm going to start dedicating 25% of my portfolio to gurfocus.com's free feature "consensus picks". Plan is to buy equities in which more than 4 of the top rated fund managers have also bought in the last quarter, and only those which are down since the announcement. I would thereby be buying stocks discounted from when top fund managers, some of the best analysts out there, had bought their position. My criteria would be buying into a business I generally understand with a positive future outlook, that still has low p/e, low debt.

Obviously this is not foolproof but I think this is a pretty great way to mimic some of the best. A con to the strategy is a lack of knowing when exactly to sell but the added margin of safety of buying stocks that are down since "Gurus" bought their position helps.


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## KaeJS (Sep 28, 2010)

But Guru's make mistakes all the time...

I don't think its something I would do.

The point of investing is to be ahead, not follow someone elses trades.

If it were as easy as "following the guru's", everyone would do it.


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## Abha (Jun 26, 2011)

Before you commit to this strategy take a look at John Paulson and Bruce Berkovitz

Both are regarded as two of the smartest investors alive and look at their YTD performance.

Even though you have a 25% allocation, I think you are making a mistake with this strategy.


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## Banalanal (Mar 28, 2011)

KaeJS said:


> But Guru's make mistakes all the time...
> 
> I don't think its something I would do.
> 
> ...


I think this is a weak argument. If "Gurus" who by definition are the fund managers with the best long term track record who have the best professional training and resources at hand "make mistakes all the time", direct investing on my own analysis of companies is bound to have much greater mistakes. 

The point of investing is to make me money, I don't care if that means I bought and sold something because I was influenced by a consensus among the best.

And if the argument is not "everyone is doing it so it can't be great", I feel good about that.


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## Banalanal (Mar 28, 2011)

So with the last two responses, I have not seen one valid argument against this strategy. YTD performance means nothing given my long term approach and it certainly does not affect their standing as a top fund manager. Much too short term of a period to matter.


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## HaroldCrump (Jun 10, 2009)

One tiny, pesky problem is that mere mortal retail investors like us usually cannot get the same deals that the big guys get.
Think of how someone like Buffet structured his investment in Goldman Sachs back in '09.
Specially structured convertible debentures/preferreds, private equity, PIPE deals, etc. are not available to us.
Neither do we get board seats to influence the direction and decisions of the corporation.
You will never know the full details of how those large investments are structured and what hidden sops the big guy got.

Also, by the time the news of such big investments trickle down to the mortals like us, the best prices are gone and stock has already moved up a few % points.


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## Banalanal (Mar 28, 2011)

I appreciate all the feedback but reread my strategy. I am only buying those consensus picks that have dropped in price since the Gurus bought into the shares the previous quarter. So I am buying them discounted.

Also, I was thinking about the comment "everyone would be doing it if it worked". And obviously there are lots of people that give their money to the fund managers to invest for them, so of course there are lots of people doing that and it works. I am just looking for a novel and cheaper way to incorporate some of the best investment opinions into my portfolio for a discounted price.


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## MoneyGal (Apr 24, 2009)

Banalanal said:


> I appreciate all the feedback but reread my strategy. I am only buying those consensus picks that have dropped in price since the Gurus bought into the shares the previous quarter.* So I am buying them discounted.*


Scary assumption.


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## Banalanal (Mar 28, 2011)

It's not an assumption, it would be a fact. Discounted from when the short list of Gurus purchased the equity.


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## brad (May 22, 2009)

Banalanal said:


> It's not an assumption, it would be a fact. Discounted from when the short list of Gurus purchased the equity.


When you say "discounted" you're assuming that the price is lower now but will be higher in the future. How do you know the price isn't simply on the way down and will never recover?


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## Banalanal (Mar 28, 2011)

With any stock I buy I can't know it will not end up at zero; the risk we take. What I am doing is using a consensus among the most respected investors and buying their same purchases but at a cheaper price than when they purchased it. I am just trying to put the odds in my favor.


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## the-royal-mail (Dec 11, 2009)

I am a bit surprised at all the responses against the OP's idea. FWIW, I like the idea. What can the OP really lose by trying it? Esp since he's only considering doing this with 25% of his portfolio. I see no problem learning from the experts and top performers. Isn't that how all of us get ahead in life? ie. through education?

P.S. The only thing I'm a bit uncomfortable with is the time lag. Could the OP perhaps find a site that delivers the info to his inbox in a more timely manner?


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## Banalanal (Mar 28, 2011)

Well because I am buying consensus picks I don't mind waiting. It's not possible to get instant data on consensus picks for obvious reasons and I like that strategy better than following just one Guru. The lag will be from the last quarter - anywhere from 1 day to 90 days. But the lag doesn't necessarily negatively impact me given I am only looking to buy equities that have fallen since the group of Gurus bought them.


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## donald (Apr 18, 2011)

2 yrs ago i joined a boxing class,i wanted to see if i could compete(true story)
I trained for mths with in the class on conditioning and the class leader would take us "serious" guys after class and spar with head gear,i learned alot,how to throw a proper punch,cover my head,weak hand jabs,body shoots ect.

We were not allowed to get a card into our first amateur fight for 6 mths,trianed 3 times a week in 2 hrs sessions,everytime i spared with my coach he would try to hit me abit harder and he would tell me how different it would be when i "lost my virginity" when i would be in my first fight,i thought the sparing would be similar to my first card.(my coach wasnt trying to hurt me or score points)

In the 3rd round of my first fight the ref called it,i faught a guy who was amateur boxing for 3 yrs.....a 3 min round felt like a hr,i never boxed again,i still do drop ins because its fun,but i learned i didnt want to be a "boxer"'

Hey if its mad money go for it,if not...your nuts!lol,my 3 cents.(this story is very similar to what your taking about,the guys your following are the "mike tysons"they know how and what there doing,ive been in the market for 6 mths,it feels like my boxing expierence,and im in multi-national blue chips nevermind.)lol


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## Cal (Jun 17, 2009)

I agree w t-r-m. The OP is limiting the exposure/risk.

Alot of us, only post and recommend what we are familiar or confortable with. Or what has worked for us. Myself included.

This limited exposure would allow the OP to view, and think about different investing habits, outside of his/her own.


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## Abha (Jun 26, 2011)

Cal said:


> I agree w t-r-m. The OP is limiting the exposure/risk.
> 
> Alot of us, only post and recommend what we are familiar or confortable with. Or what has worked for us. Myself included.
> 
> This limited exposure would allow the OP to view, and think about different investing habits, outside of his/her own.


25% is still a hefty allocation to be chasing picks by others. Essentially it is picking stocks blindly in the hopes that the "guru" did his due diligence.

Sino Forest was a pick by John Paulson and his analysts did a lot of due diligence. I don't need to tell you what the end result was.

Good luck to the OP but it is a very dangerous strategy with limited upside. Most guru's won't risk more than 1 - 5% of their capital on any given stock. 

I hope you do well but just keep the warnings that I and others have given you in the back of your mind before you deploy your hard earned money into the market.


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## Sampson (Apr 3, 2009)

I've visited the site frequently and several years ago considered do the same thing (chasing the gurus).

You write that others are not providing specific arguments against the strategy but I also don't see any arguments for the strategy. You assumption is that the gurus will continue to be as successful going forward as they were in the past.

One easy way to find this out is to look through the turnover in the 'consensus' picks. You'll find that many gurus sell at a loss. I've not done any hard comparisons myself, but I often see the losses, and would even predict there are more prevalent than winners.


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## gibor365 (Apr 1, 2011)

Banalanal said:


> With any stock I buy I can't know it will not end up at zero; the risk we take. What I am doing is using a consensus among the most respected investors and buying their same purchases but at a cheaper price than when they purchased it. I am just trying to put the odds in my favor.


Interesting how it will go for you. Please publish your updates


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## gibor365 (Apr 1, 2011)

Just took a look how gurus did in the last 6 months.

http://www.gurufocus.com/score_board.php

Only 4 out of 103 gurus in positive territory?!  average return -14%


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## MoneyMaker (Jun 1, 2009)

KaeJS said:


> But Guru's make mistakes all the time...
> 
> I don't think its something I would do.
> 
> ...


You can definitely find great investment ideas looking into the portfolios of managers that share a similar investment style.

GuruFocus is great as the majority of the 'guru's' they track are are value oriented. I wouldn't blindly follow their trades as there is a reporting lag however one could generate a handful of investment ideas to inspect.


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## MoneyMaker (Jun 1, 2009)

gibor said:


> Just took a look how gurus did in the last 6 months.
> 
> http://www.gurufocus.com/score_board.php
> 
> Only 4 out of 103 gurus in positive territory?!  average return -14%


Way too short of a time span to evaluate the guru's abilities. Best to judge them on a 5, 10, 15, 20 years basis instead.


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## Dibs (May 26, 2011)

I just took a look at the costs, and it seems like the subscription with real-time picks is $249 a year. What's the best way to evaluate whether would be cost effective? Would it be based on how much you are willing to invest?


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## andrewf (Mar 1, 2010)

Seems like a waste to me. Try paper trading this strategy for a few quarters at least and see how you do.


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## gibor365 (Apr 1, 2011)

andrewf said:


> Seems like a waste to me. Try paper trading this strategy for a few quarters at least and see how you do.


... and pay $249 for paper strategy?!

you can also go to dividend.com , they recommend specific stock and freq change their recommendations


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## ddkay (Nov 20, 2010)

Or just pick your favourite guru and track their position updates via Schedule 13D / Form 13F filings on sec.gov's EDGAR database for free.



> Schedule 13D is an SEC filing that must be submitted to the US Securities and Exchange Commission within 10 days, by anyone who acquires beneficial ownership of more than 5% of any class of publicly-traded securities in a public company. A filer must promptly update its Schedule 13D filing to reflect any material change in the facts disclosed, including, among other things, the acquisition or disposition of 1% or more of the class of securities that are the subject of the filing.





> Form 13F is a quarterly report of equity holdings by filed institutional investment managers with at least $100 million in equity assets under management of, as required by the United States Securities and Exchange Commission (SEC). These investors include banks, insurance companies, hedge funds, investment companies, foundations, and pension funds. Form 13F only reports long positions. Short positions are not required to be disclosed and are not reported.


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## gibor365 (Apr 1, 2011)

ddkay said:


> Or just pick your favourite guru and track their position updates via Schedule 13D / Form 13F filings on sec.gov's EDGAR database for free.


This is interesting....but where to find link to this DB?


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## ddkay (Nov 20, 2010)

Example for Carl Icahn:

http://www.sec.gov/cgi-bin/browse-e...93&type=13F-HR&dateb=&owner=exclude&count=100


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## gibor365 (Apr 1, 2011)

ddkay said:


> Example for Carl Icahn:
> 
> http://www.sec.gov/cgi-bin/browse-e...93&type=13F-HR&dateb=&owner=exclude&count=100


Out of curiosity checked on W. Buffet
http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000315090&owner=exclude&count=40

But there is nothing in this txt doc


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## ddkay (Nov 20, 2010)

Does he run a fund outside Berkshire Hathaway?

This one is for BRK: http://www.sec.gov/cgi-bin/browse-e...983&type=13f-hr&dateb=&owner=exclude&count=40


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## gibor365 (Apr 1, 2011)

ddkay said:


> Does he run a fund outside Berkshire Hathaway?
> 
> This one is for BRK: http://www.sec.gov/cgi-bin/browse-e...983&type=13f-hr&dateb=&owner=exclude&count=40


and how you can know his transactions from this link?


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## ddkay (Nov 20, 2010)

I filtered Berkshire for "13F-HR", click the August 15, 2011 filing for example and d13fhr.txt should show BRK holdings and their breakdown as of June 30, 2011.

The forms don't show specific transaction dates unfortunately. They can either happen within 10 days for the 13D or within the quarter for the 13F.


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## Xoron (Jun 22, 2010)

*Buffett strategy*

This was from back in 2007, but the summary is that 

_"Even if you bought the same stocks a month after Buffett and his holding company Berkshire Hathaway disclosed their own purchases, you'd still be way ahead of the game."_

http://www.cnbc.com/id/21834492/Professors_Prove_Buying_What_Warren_Buffett_Buys_Will_Make_You_Money

I'm not sure I'd be willing to commit to such a strategy without more research, but on the surface is looks like it could work.


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## andrewf (Mar 1, 2010)

AlphaClone also tracks fund managers based on 13F filings. I think it is probably cheaper and better than the service you are looking at. Or, you can access the 13Fs for free.


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