[Practical Personal Finance] The "13F filings" that attract Seohak Ants... do they really help your investing?

"National Pension Service, massive buying of OOO"
"Warren Buffett's final bet, sold OO and bought OO."

Four times a year, stock communities buzz with headlines like these. Perhaps because people think, "Maybe I should buy it too," retail buying actually flows into those stocks. The psychology is that if a giant institution or a legendary investor is buying a stock, there must be some rationale behind it. At the starting point of this behavior, where anxiety about not falling behind meets the hope of hitting the jackpot, lies "13F."

Form 13F is a quarterly report that the U.S. Securities and Exchange Commission (SEC) requires from institutional investors with assets under management of 100 million dollars or more. Major institutions such as hedge funds, asset management companies, insurance firms, and pension funds are obligated to report which U.S. stocks they held during the quarter and in what amounts.

Not only can you see the portfolios of large global asset managers, but you can also look up the portfolios of Warren Buffett (Berkshire Hathaway), Ray Dalio (Bridgewater Associates), and Stanley Druckenmiller (Duquesne Family Office) through the SEC's Electronic Data Gathering, Analysis, and Retrieval system (EDGAR).

13F, Wall Street whales' investment notes... but outdated notes

Form 13F filings attract attention every time. Under the idea of tracking the moves of "whales" (large institutions) to generate investment ideas, exchange-traded funds (ETFs) have even emerged that simply replicate the top holdings of these big players. For individual investors who have limited access to information, the advantages are clear. You can see which sectors large pools of capital are moving into and which stocks they newly added to their portfolios.

However, there are several hidden risks in this "chasing the whales" strategy. The first is timing. Form 13F can be submitted up to 45 days after the end of each quarter. Since institutions generally do not want to expose their portfolios to competitors, they tend to file close to the deadline. In other words, the data released in January reflects the previous quarter (October to December), and there is at least a one- to two-month gap from the actual time of purchase. On top of that, there is a significant possibility that the institution has already changed its positions during those 45 days.

Yuanta Securities pointed out in a 13F analysis report that "there are cases where institutional investors buy at the end of the quarter but no longer hold the position by the time of reporting." This means that when a retail investor thinks, "Wow, Buffett bought this" and follows the trade after the filing is released, Buffett may already have sold out and moved on.

'You only see the longs'... another trap

Beyond timing, Form 13F has structural blind spots. It only covers long positions. Short selling positions, put options, bonds, commodities, and so on are not included. In effect, it provides only half of the overall portfolio information.

Hedge funds often employ strategies where they hold a particular stock long while simultaneously shorting that stock or a related index to hedge risk. Looking only at the disclosed holdings, it can appear as if they are making an aggressive bet, but in reality they may be offsetting the risk with positions in the opposite direction. Yuanta Securities explained that "even if a fund holds a certain stock, it is not uncommon for the actual net exposure of the overall portfolio to be completely different because the position is hedged with short selling or put options."

It is also important to remember that each institution has a different investment style. Some, like Berkshire Hathaway, focus on long-term value investing, while others are hedge funds that mainly employ long-short strategies and have very high portfolio turnover. Even when the same stock appears in multiple portfolios, the context and strategy of each institution are different, so making a buy decision based solely on the fact that "this stock is included" is extremely risky.

So how have returns looked when investors followed 13F filings? While it is not a perfect proxy, the performance of the "Global X Guru ETF" can serve as a reference. This product invests by tracking the top holdings of large U.S.-listed hedge funds, based on their SEC Form 13F reports. Over the past five years, this ETF has underperformed the S&P 500 Index. Even if the gap narrows over short periods, it shows that generating long-term excess returns is difficult.

'The right way to use' Form 13F filings

U.S. SEC 13F Filing Cover

That does not mean Form 13F is useless. The key is to distinguish between "blind imitation" and "selective reference."

Investment professionals generally recommend a few ways to use it. First, focus on newly added positions. The fact that an institution has newly added a stock it did not hold at all before, especially if that stock jumps straight into the top tier of the portfolio, suggests strong conviction. You can use this as a starting point to analyze, "Why did they buy this stock at this particular time?"

Second, check whether position sizes have been increased. If an institution significantly increases the weight of a stock it already holds, it indicates that it still believes its investment thesis is valid. Conversely, if multiple institutions are simultaneously reducing their positions in a stock, that can be viewed as a warning signal.

Third, look for overlap among different institutions' holdings. If several hedge funds with different investment philosophies all initiate new positions in the same stock in the same quarter, it can be read as a signal that the stock may be undervalued. It is meaningful in that multiple independent institutions have arrived at the same conclusion.

Of course, even after all these considerations, there is a step that must not be skipped: directly reviewing the company's earnings, valuation, and industry trends. Form 13F is only a first-level filter for screening investment ideas; it cannot serve as the final basis for a buy decision. It is closer to a reference book for reading market flows than an answer sheet. Rather than blindly climbing onto a whale's back, it is safer and more realistic to use it to figure out which direction the whale's head is pointing.