Well, my Tradestreaming Hedge Fund rebalanced last week. The portfolio (access details here) is up almost 20% YTD, handily beating the S&P500 which is up a bit over 12% on the year.
I sold $MIC and $PCLN, two stocks that I’ve owned for the bulk of 2012. $MIC was a big winner and $PCLN had been as well, until it gave back much of its gains in August.
So far in 2012, I’ve made 17 trades. The portfolio is based upon the research I published in Tradestream Your Way to Profits and mimics certain strategies of 12 top hedge fund managers. It’s not as simple as merely aping top hedge funds’ trading — certain hedge funds replicate differently than others.
For example, investors may begin to approximate Warren Buffett’s returns by buying his largest holding while Pershing Square’s Bill Ackman may replicate best by buying his newest holding.
Anyway, couple more details about the Tradestreaming Hedge Fund Guru Portfolio
In a recent webinar, I sat with Maz Jadallah, founder/CEO of AlphaClone, a software provider and investment manager enabling what I call “piggybacking strategies” of top hedge funds.
We discussed some of the objections investors have to creating strategies involving replicating hedge funds. We also provided 5 tips to perform better using cloning strategies. It was a intriguing session with some great questions from the audience — make sure you sign up to this blog to be notified of our next event.
Join us this coming Monday May 9th @ 4pm ET for a free online discussion on the “5 Myths About Cloning Hedge Funds”.
We’ve been following hedge fund replication strategies (what I call piggybacking) since the early days of this blog and back to 2009 on NewRules. It’s not only a topic I like to analyze, but I’ve moved a lot of my own investment activity to leverage the power of cloning.
Readers of Tradestreaming will know that AlphaClone, a research platform that enables investors to backtest multiple cloned portfolios of the world’s best investors, has been helping to make piggybacking practical for all types of investors.
But investors I speak with still struggle with understanding the rigor in cloning — misconceptions about the strategy still abound.
So, I’ve invited Maz Jadallah, founder and CEO of AlphaClone, to address these issues. In an upcoming webinar, we’ll discuss:
the effects on performance of the timing delay in disclosure filing
the role of luck in clone portfolio performance
the importance of the absence of hedge fund short positions from disclosures;
Space is limited. Click here to reserve your seat now.
A take-off of his great blog, Jay at MarketFolly has produced a quarterly newsletter that looks at entire portfolios of hedge fund gurus (like Seth Klarman, Bill Ackman, Warren Buffett) and analyzes their quarterly moves. The premium newsletter also identifies 3 different individual stocks and breaks down the thesis, examining why the guru investor is buying a particular stock, what the catalysts are and importantly, what’s the bear case. These stock picks are the hidden gems of the newsletter and are written up as a hedge fund analyst would present these ideas to a portfolio manager.
Research shows that piggybacking certain professional investors does work and investors who subscribe to this methodology will find the Hedge Fund Wisdom newsletter a good resource.
All in all, you’re looking at 75 pages of investing goodness — priced for early sales at a nice introductory offer.
Here’s CNBC’s weekly hedge fund pick of the week and another window into piggyback investing for our readers. Every week. Anthony Scaramucci aka ‘The Hedge’, offers insight at the names getting the most buzz across the hedge fund community. Scaramucci runs SkyBridge Capital, a leading alternative asset manager with more than $7 billion under management.
This week focuses on cigarette manufacturer Lorillard ($LO), which he thinks is inexpensive, defensive and has a nice dividend (> 5%).
This post was originally included as part of an ebook that I published alongside the launch of my book, Tradestream, entitled “Tradestreaming and the Future of Investing”. The content was so good I wanted everyone to have access to it. 🙂
Piggyback investing is about following the “right” people. In a lot of ways following overall sentiment of an online community is exactly what you want to avoid. The simple premise is that “crowd sourcing” is only valuable when you are able to accurately define and isolate the right crowd. Accepting this as essential first, then any application that then can overlay real-time information about the “right crowd’s” moves is valuable. Here are just a few applications that can benefit from real-time information gathering:
Manager selection: The AlphaClone platform allows you to tap the collective intelligence of groups of managers that are either predefined by us or defined by the use. Some of our groups are dynamic in that the list of managers that make up the group change ever quarter based on some criteria. Take our High Concentration fund group: it selects the 25 managers each quarter that have the highest disclosed market value spread over fifty positions or less. I could see a dynamic group that is constructed of the 25 managers that have garnered the highest votes for inclusion amongst the AlphaClone user community or the 25 managers whose fund page has had the highest visitor traffic over the past 30/60/90 days.
Stock selection: our platform uses quarterly public filings to select the holdings that make up clone portfolios. A real-time overlay that precipitates intra quarter changes in portfolio weightings for securities in the clone would be really interesting. Real-time sources could be intra quarter public filings from the manager or managers in a clone (13G/13D filings), real-time analyst consensus recommendations (especially upside and downside “surprises”), or real-time events (bankruptcy, M&A).
Strategy selection: our platform allows investors to create and backtest clones based on different “clone strategies” (Top Holdings, Best Ideas, Popularity in top 20) and customize clones by employing hedging options and rebalance options. We consider that simply a starting point. I can see our community providing feedback on new clone strategies they’d like to see as well as tips on implementing clones.
I see the real time web as a new communications medium that definitely has relevance for investors and investment services but just like any new communications medium, how useful it will be will largely depend on how it is applied and by whom (i.e. yahoo stock message boards vs. twitter feed from “pro investor here”).
Mazin founded AlphaClone in 2008 with the simple purpose to empower the average investor by giving him intelligent, instant and transparent access to the world’s best fund managers. Mazin was a 12-year veteran of technology-driven media businesses including roles at Time Warner and OpenTV.
Combining an interview with founder and CEO, Maz Jadallah, the paper includes his comments that should provide a resounding recommendation for using blogging as a lead generation tool for premium financial products:
Jadallah: Hiring a PR firm turned out to be a disaster for us. They simply did not perform well. The important point here is what does a startup do when they have zero/limited budget for marketing. Answer: blog, blog, blog, use word of mouth, run affiliate programs, cold call reporters, try to get content syndicated on third party sites!!