13Fs - What Are They? And Why Do They Matter?

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They say imitation is the sincerest form of flattery.

If only there were a way to get a look into what some of the smartest money managers in the world are buying and selling…

Welcome to the world of 13Fs.

If you’ve ever heard the term smart money, this is it.

13Fs are quarterly reports filed by institutional investment managers with at least $100 million in equity assets under management with the U.S. Securities and Exchange Commission (SEC). A 13F requires managers to disclose their equity holdings, including stocks, warrants, and options, providing a snapshot of the manager's portfolio at the end of each quarter.

The purpose of a 13F filing is to provide transparency into the investment activities of large institutional managers, allowing investors and the public to see where these major funds are allocating their investments in the U.S. equity markets.

It can be a useful tool for individual investors and analysts to track influential investment managers' investment trends and strategies, potentially influencing investment decisions and market movements.

However, monitoring 13Fs has significant downsides as well:

• Stale Information: The #1 downside is that 13Fs are filed 45 days after the reporting date. This means that hedge funds that are much more active may have added to or sold these positions between the filing date and the release of the 13Fs. This is an issue for hedge funds that take active, very short-term bets, but this does not negate the importance of 13Fs because holding periods for hedge funds typically exceed 45 days.

• Is the money really that “Smart”? Remember this famous table that was going around a couple of weeks ago?

As we can see, hedge fund performance last year was less than stellar. Only four of these beat the S&P500, up 24.2% for the year. Maybe we should copy Nancy Pelosi’s trade, as she was up 65% in 2023, besting all hedge funds.

The Key Takeaway: 13Fs can prove very useful in identifying general trends amongst institutional managers. This is another data point that investors need to consider when thinking about mosaic theory to form their thesis, and it should never be blindly followed without full due diligence.

An individual investor can also more heavily consider the changes a particular manager makes who mimics their style. If you like their thinking, it might make sense to do more digging on some of their bets.

Of course, 13Fs also feed the need for the public’s insatiable desire for a “great man.” That is - a certain individual who achieves godlike status as his clairvoyant picks trounce competitors.

One of these types is Michael Burry, the main character of The Big Short, and we got an update from him this time. It looks like Burry is capitulating, as he has now closed his bet against the semiconductor index SOXX:

Ouch. That’s gotta hurt. Burry’s Scion Asset Management also built new healthcare, tech, and financial positions. Particularly interesting is that he’s adding China Tech, which has been a total disaster as of late.

On the other side of this trade is another “Great Man”, Dan Loeb of Third Point. See his stance on big tech below.

Here were the notable standouts from this filing period, all figures are share amounts:

• Berkshire increasing position in SIRI (40.2M, from 9.7M), decreasing position in PARA (63.3M, from 93.7M) and HPQ (22.9M, from 51.5M), and liquidated STNE (was 10.7M);

• Greenlight (Einhorn) increased stakes in KD (6.4m, from 5.6m);

• Third Point initiated positions in VZ (4.7M), decreased position in UBER (1M, from 4.2M), AMZN (4.2M, from 4.7M), and liquidated positions in GOOGL (was 900k), TMUS (was 1M);

• Elliott initiated positions in CCI (1.2M), ETSY (1.9M), MTCH (3M), EQIX (puts for 28k), SNAP (puts for 2M), and liquidated positions in ARM (980k), AAPL/SWKS/TSM (puts);

• ValueAct initiated positions in DIS (5.1M), EXPE (4.3M), PAYC (608k), decreased positions in NYT (3.6M, was 7.3M), SPOT (1.0M, was 1.3M), and liquidated position in ALRM (was 585k);

• Baupost decreased position in GOOG (2.9M, was 3.8M), LLYVK (718k, was 1.9m), SSNC (1.0m, was 2.3m), and liquidated positions in QRVO (936k), STX (600k);

• Starboard position in NWSA (10.4M), and decreased positions in CRM (1.5M, was 1.7M), WIX (3.3M, was 3.7M).

• Barclays & GS have filed a combined position of ~14M shares (11.6% stake) in CNK, raising questions on activism.

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Cheers,

The GRIT Alpha Team

The author of this newsletter owns a long position in Taiwan Semiconductor Mfg. Co. Ltd. (TSM), Google (GOOG), Amazon (AMZN), and Salesforce Inc (CRM) in the fund they manage. There is no guarantee that the author will maintain such a position in the future. An insider to GRIT currently holds ownership positions in Nvidia (NVDA), Amazon (AMZN), Microsoft (MSFT), Google (GOOG), and Apple (APPL). The insider to GRIT Capital Corporation does not guarantee they will maintain their ownership interest in Nvidia, Amazon, Microsoft, Google, and Apple and may increase or sell such interest at any time.

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