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A Valentine’s Gift: Whale Watching

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This is not in response to a specific teaser, but I have seen a raft of teaser emails lately about “watching the insiders” and “whale watching,” including some that mention specific billionaires and tease specific stocks that they’re buying that you, too, should buy.

Why now?

Well, I’m not going to get into the specific teasers right this minute — I’ll try to get back to that and spin out another one before the weekend for you — but I though it might be helpful to a few of you to have a quick primer on following the big activist and institutional investors (“Whale Watching” in popular parlance).

The reason that we’re currently hearing a lot about this is that tomorrow is the deadline for filing form 13F with the SEC — a few investors have already filed theirs, but many wait until the last minute (and it’s a Friday this time around, so they might get lucky and not have their filings noticed by quite as many people).

The 13F is a filing that large investors, or those who control large pools of investable cash, have to make with the SEC. It updates their holdings, essentially, providing a list of what they own and, by inference, a list of what they have bought or sold since the last filing. This includes folks who manage their own millions, people who run investment partnerships that manage gazillions, as well as those responsible for making investment decisions for large pools of capital held by private or public institutions. The cutoff is $100 million, so they don’t even have to be THAT big, though a hundred million sounds like a fair amount of money to me.

The filing is required to be made 45 days after the end of each calendar quarter, so February 15 should be our deadline this time around for the December quarter — and while it might be even more interesting to check in with them in three months about what they’re doing right now, while the market is ridiculously turbulent, it’s still sometimes valuable to consider what they did last Fall.

Now, following 13Fs is not exactly a new pastime for investors — so if someone tells you that they have a secret way to track the “whales” or the activists, they’re exaggerating a little bit. What these services do for you, in many ways, is similar to part of what Morningstar does with it’s mutual fund reports: They actually track the changes, so you don’t have to.

So, much the way Morningstar will have little indications for which top holdings of a mutual fund have been initiated, increased, or reduced during a reporting period (also a quarter), so many newsletters and trading services have cropped up to do the same thing for 13F filings, particularly for the big, famous, activist investors.

This is not too different from the insider trading services that track filings of Form 4 and other insider trading activity reported to the SEC — the SEC makes all of this stuff publicly available, but they don’t sort it for you. The trading services essentially just search and sort, work that you could do yourself if you had the time or inclination.

In the case of the 13F, here’s one simple way of looking them up as they roll in:

Go to the SEC Edgar database — this is the free database that makes all public company and SEC filings accessible to everyone. The page you want is the Company Search page.

Enter the name of a particular investor or investing company who interests you in the “Company Name” box, and hit enter. Here’s an example of what you see if you search for Nelson Peltz, one particularly famous activist investor.

The results are chronological, so you’ll see the most recent filings at the top. What you’ll most likely see at the very top today or tomorrow, if you did indeed search on the right name, is a 13F-HR, which is that quarterly report that we’re interested in. Just click on that, and you’ll see the full text link — these reports are usually very short, just a page or two with a table of current investments.

What you’ll probably notice, however, is that most investors of this ilk report under several different names — their own name, and the names of whatever companies or funds they control. So Peltz, for example, lists only two holdings under his name, when we know just by reading the newspapers that he is certainly more active than that.

Near the top of the 13F-HR filing for his personal name, however, in the text of the actual filing, is the “List of Other Managers Reporting for this Manager.” That should provide you with the key names to search for your next 13F search in Edgar. In this case, you’d then want to search on Trian Fund Management, the name of his firm (there are a few other Trian reporting entities, too), and in that case you’d see the list of his holdings that looks much more familiar and includes Heinz, Wendy’s, Cheesecake Factory, and, new this quarter, Tiffany’s.

Carl Icahn, another iconic investor, also files in lots of different places — there’s a main listing under Icahn Carl C which lists a lot of his holdings, including Motorola, Blockbuster, Imclone, etc., but it also lists other entities that report for him: Icahn Management, Icahn Enterprises Holdings, High Coast Limited Partnership, Highcrest Investors, Gascon Partners, and a few others.

Some investors don’t hold anything in their name, and report solely through their company — so you will find a 13F for Berkshire Hathaway, for example, but not for Warren Buffett personally. Buffett always waits until the last moment, since people watch him like a hawk, so you can certainly assume that Berkshire’s 13F-HR will not be up until the 15th, and probably late in the day.

Another one like that, just to expand the horizons a little, would be David Swensen — people follow him very closely, but he manages the Yale Endowment, so you can only find the 13F-HR that he signs by searching for Yale University, and you’ll see that some of their large holdings are Douglas Emmett and AIG, so maybe they didn’t have that great a quarter with that portion of their portfolio. The same kind of information can be found for many other big institutions and endowments, some of which have equally (OK, maybe not “equally”, Swensen’s probably at the top of that list) well-respected managers.

As you might imagine, if you want to track the buying/selling yourself, you can then go back to the prior 13F-HR filing, which will be from mid-November, and compare the list of shareholdings (each report indicates exactly how many shares the reporter controls).

So … you’ll almost definitely get offers from several different folks to track this stuff for you if you’re interested, whether or not the ad tells you that this is what they’re doing. If you want to do it yourself, it will take a little time but it’s certainly possible for any investor — and truth be told, it’s probably good experience for most investors, especially relatively new investors who haven’t dug through too many public filings, to spend a little time searching the Edgar database just to get familiar with the real, unexpurgated stuff. SEC filings can be incredibly boring to read, much of the time, but usually mean much more than the quips on CNBC or the opinions on Marketwatch.com or in the Wall Street Journal. Of course, they’re still much less fascinating than the Gumshoe’s own ruminations.

Finally, let me suggest a little exercise if anyone’s interested: If we want to pool our resources a little, anyone that takes a few minutes to explore 13F filings for a particular big investor can add a comment here sharing what they found interesting — usually, what’s most interesting for most investors are changes from the prior quarter, especially new investments and investments that disappeared from the list since last time. I’ve seen quite a few 13Fs that are out already, and they will all be filed by the end of the day on Friday … so, should you be so inclined, there’s your Gumshoe homework for the holiday weekend!

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11 Responses to A Valentine’s Gift: Whale Watching

  1. Cocoon asks the Gumshoo Guru:
    Have you done a piece on ‘The Oxford Club’
    recently? A recent mailing to me “….Your Portfolio Into A Perpetual Money Machine”.
    Sounds to me like staggered bond buying.
    Thanks,
    Cocoon

  2. Thanks for this great article.
    I have a question. I started researching some companies and I got stuck.

    It seems that Frank Russell Co. files for a long list of major companies. I see the list of filings by document # and company name but I can’t figure out how to pull up the document #.

    Thank you in advance for the help.
    PLT

  3. Cocoon;
    Perpetual Money Machine is a diversified mix of 8 CEF’s (closed-end funds) paying 7-10% interest monthly. Many are currently trading at a significant discount (10%). Some I own, some not. They are: FAX,CHY,DSU,EOS,IGR,PFL,EHI,ZTR.

    Interesting – a 13-G filing showed the People’s Republic of China owns 16.9% of Accuray (ARAY) – makers of “CyberKnife” precision guided radiosurgery for cancer. Do not own stock yet – but considering it. Wonder when we’ll see the Chinese version??

  4. Its interesting to see OPTV (OpenTV) shares are being bought by Chairmen heavily in the past few months. Maybe he knows something which we all don’t know. I see some Institutional Investment also in this company.

  5. Gumshoe, thanks for the inspiration to get a strong cup of coffee and get ready to do the grind. I’m always interested in what James Simons of Renaissance Technologies buys, and boy has he been buying. Could find only one personal buy, options on Franklin Electronic (FEP), but the fund has been buying a lot of different kinds of companies, including Loew’s (6 million shares) which I know interests you. Also heavy into Regal Entertainment (7.5 million) and Nationwide Financial (3.7 million shares). Of interest to me was 7 million shares of Steelcase, one of my favorite companies, which I felt obliged to sell last year after a modest profit. May think about buying again. Also of interest were two companies I’ve been watching and thinking about, Pixelworks (3 million) and Seachange International (only 1.5 million shares). Also of interest to me was Mesabi Trust, which I like for its dividends (1 million shares). There was one more of great interest, which I’ll keep for a separate post after investigating it.

  6. The other company Simons and Renaissance were into that interested me was New York MAGIC (NYM), which insures shipping and other marine activities. They have a LOT of cash and are looking around to buy some bargains, of which more and more are turning up. It has done well since Simons bought it.

  7. All right gumshoe- Who might this one be?

    Now, while I can’t share with you specifically how I found it, I can tell you it started in the late 1970s, when silver traded for
    $50/oz . . .

    A family-owned outfit of miners stood on the verge of single-handedly cornering the world’s entire silver market.

    Their biggest mine, tucked away in a desolate area 860 miles north of Vancouver–oddly enough called Rupert’s Paradise–was all they needed.

    In fact, it was so large that if they succeeded, with this final mine, they’d become the De Beers of the silver industry.

    Inside waited $3.5 billion worth (in 1980 currency) of easily extractable silver – and even more in zinc and iron.

    Feverishly they constructed camps, raised a 1,000-ton-per-day mill, confirmed drill results, and had mine shafts ready to begin extraction. All in all, they were 90% ready to go online.

    They even had a plethora of locals eager for work and supportive of the project. Everything seemed ready to go.

    But then it happened . . .

    Within the period of a few days, the price of silver collapsed from $50 to $5.

    For awhile, the company held on to the land, hoping one day the price would rise enough for them to start extracting. But with each day that passed, their assets were turning into a Chapter 11-style liability.

    By 1982, their property was confiscated. And just like that, their dreams of a monopoly were gone. The land would slip into obscurity, not to be heard from for more than two decades.

    But get this . . .

    Today, everything is still in place and ready to go. There’s hardly another dime that needs to be invested before extraction can start. In fact:

    Infrastructure is already complete and ready to go online in Rupert’s Paradise, including a 1,000 ton/day mill
    70 million ounces in silver wait in the ground
    there is $4.2 billion worth of zinc
    and $3.53 billion in lead
    Total, the entire area’s worth well over $10 billion.

    And the best part is, it was just picked up by a tiny mining outfit valued at less than $100 million. With all of the infrastructure already in place, all it needs is a signature or two for the share price to start surging.

    “You’ve opened my eyes to many companies I had no knowledge of, and I look forward to what the next year or so will reveal.” – M Mullins In fact, there’s such an amazing potential for historic profits that the second I caught wind everything was ready to go, I loaded up as much as possible.

    My reasoning is simple. There’s just as much if not more leverage in this one – once forgotten – gem than there is in any other Mining Speculator play.

    As with any of my personal picks that eventually become “big enough” for an investment, the easiest gains will already be made.

    When this gem goes online, I believe those assets could rapidly be realized – suddenly turning every $10,000 invested into $992,330.28.

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