Decipher The Hedge Fund Code

Have you ever wished you could see inside the mind of a billionaire investor?

Well, four times a year, you can.

At the end of each quarter, hedge fund managers are required to report their portfolios to the public in a Securities and Exchange Commission (SEC) filing called a 13F.

These 13F filings offer investors a golden opportunity to see how the “smart money” trades.

Today, I’m going to show you how to read a 13F and invest alongside some of Wall Street’s brightest minds.

Cracking the Code

Every institutional manager who oversees $100 million or more in assets is required to file a 13F. And all of these 13Fs are available for free on EDGAR, the SEC’s web search portal. Provided in both HTML and XML form, the filing lists all of the fund’s long equity and option positions.

First, enter the name of a hedge fund in the “Company Name” search box. Once you’ve located the fund, filter out the 13Fs by specifying the filing type.

With filing in hand, you can determine a fund’s positions and their dollar value. From the value of each position, you can calculate how a fund’s portfolio is allocated by sector. As you know, portfolio diversification is the key to success in today’s unpredictable market.

Finally, you can compare a previous quarter’s 13F to a recent filing and discover the firm’s newest buys and sells.

For example, Warren Buffett’s Berkshire Hathaway fund (BRK-A) held $1.3 billion in equities as of last quarter. Buffett’s top three holdings were Wells Fargo & Co. (WFC), The Kraft Heinz Co. (KHC), and The Coca-Cola Co. (KO). At present, Buffett’s portfolio is overweight financials and consumer staples.

Kraft was Buffett’s biggest new buy last quarter, and it now represents 18% of his total portfolio. Buffett also sold off his entire Viacom Inc. (VIAB) and DirecTV Inc. (DTV) positions, which were worth about 2.7% of his portfolio.