Tag Archives: piggyback investing

Piggybacking investing gurus just got easier

AlphaClone is probably the best research platform out there for investors looking to recreate, or “clone”, portfolios developed by leading hedge fund and mutual fund managers.

money-laundry-with-water-reflection-effectAlphaClone is Mebane Faber’s online foray that implements much of the research he recently published in The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. It’s a good read and AlphaClone has Faber’s extremely-well researched homework embedded in its pixels.

AlphaClone has now taken its platform one-step further and partnered with Folio Investing to make it even easier for investors to implement the piggyback approach by allowing:

investors to buy an entire portfolio of securities at once with one transaction, and have any dollar amount automatically distributed at the proper percentage weights across all of the stocks in the portfolio.

You can see the Folios for portfolios like the Tiger Cubs and Berkshire Hathaway here.

AlphaClone also launched a clone for a portfolio designed by the popular investment blog, MarketFolly as well.

According to AlphaClone:

Marketfolly’s prefered clone from its new group is the Top 3 Holdings clone which is up 15% year-to-date and has returned 20% annualized since 2000 (yes 20%).(5/29/09).

Not too shabby.  AlphaClone is moving further into this space and will be launching more clone groups developed by stock bloggers.  This is another important way to bring transparency to the financial blogosphere and bring quantification to some of the leading voices out there.

More Resources:

What IR needs to know about how the Internet has changed the investment process

This post appeared recently on IRWebReport as part of a guest contributor series I’ve been working on.  I thought it was a good overview and appropriate here for NewRules.

Dominic Jones is really a thought leader in his field and is really ramming it home on his analysis of how social media is impacting investor relations and what firms should do about it.  Check out the site and subscribe here.

AT New Rules of Investing, we analyze a new generation of investment sites changing the landscape of how investors consume financial content.  As investors encounter information from these new sources, it is affecting how they ultimately make investment decisions.

Combining social media, the proliferation of financial content written by professional bloggers, and the leveling of the playing field that Reg FD brought, IR professionals must concern themselves with understanding these new models and devise a strategy to address them as more and more investors turn away from consuming traditional investment media and turn to these new methods.

Before describing in detail the changes taking place in online finance, it’s important to look at what’s driving these changes and how they have affected traditional channels of financial content:

  • Costs of web publishing now equal zero given free blog hosting technologies and this has spawned millions of smart people writing about stocks via blogs.  Gartner forecasts that at the end of 2007, the number of writers who maintain a personal Web site reached 100 million.  Others think that if you add in the huge growth in popularity of social networks, their own form of blogging, the numbers get much bigger.
  • Mainstay sites like Yahoo Finance and Marketwatch have taken notice and are expanding into these spaces with 2nd generation message boards, collective intelligence (crowd sourcing), aggregation of blogs, and advanced stock screening technologies.

Expert investment communities

What is it: Expert investment communities are affinity groups of successful investors creating and sharing their analysis of the markets and stocks within a social networking framework.

What’s new: What distinguishes these sites from the activity found on message boards is that the sites actually plug into its members own investment accounts to monitor the success of their investing.  Comprised of professional investors and arm-chair analysts alike, sites like Covestor and Vestopia continuously raise the bar on participation in these communities because they layer performance on top of all opinions generated in their sites. Covestor Logo

How investors are using these sites: The trend is for these sites to register to become licensed investment advisors and investors using these systems can choose to either pay to follow specific members’ moves or the investor can open an account with these sites and turn their portfolios over to the portfolio managers participating on these sites. Covestor has recently signed a deal with TheStreet.com to syndicate some of the content created on Covestor onto TheStreet.com’s website.  Investors are ranked brutally by their performance and risk rankings. One such site, Cake Financial, has tracked over 1 million transactions on its platform.

Cake financial logoWhat it means for IR: If investors continue to move towards basing decisions off the moves of experts, expert opinion gains more and more credibility. As consumer products marketers have learned to tap into influential online communities, IR professionals need to expand roadshows (both virtual and real) to include getting exposure to these experts.  These are the new influencers.  Targeting these communities for influencers may be a more powerful way in the future for getting the work out.

Piggybacking the pros

What is it: Certain web businesses like StockPickr are constantly monitoring SEC filings and publish 13D/13F findings to their own websites, creating guru portfolios around hedge funds and mutual funds for investors to piggyback on for investment ideas.

What’s new: While the SEC has published financial filings for public consumption for years via its EDGAR system, the interface is designed for data mining, not for idea generation or stock discovery. The piggybacking systems have done the hard work for investors by data mining and arranged the content around the moves of guru investors like Warren Buffet and Carl Icahn.Stockpickr logo

How investors are using these sites: Investors can literally drill-down into SAC Capital’s Eddie Lambert’s portfolio, monitor his moves in and out of particular companies and use this information as an input into stock purchase decisions. Investors are compiling “all-star” portfolios by picking top picks from a multiple of guru portfolios.

What it means for IR: IR professionals need to gain awareness that investors are creating portfolios based on piggybacking professional portfolios. People in IR should spend the time understanding who owns their firm’s stock publicly and use that information to gain credibility for retail investors. Hedge fund managers are notorious piggybackers as well.

Investment screening 2.0

What is it: Combining technology and computer algorithms, investors can utilize new stock screening systems to approximate the same strategies employed by guru investors when sizing up prospective investments. Validea logo

What’s new: Many professional investors have written and spoken about the criteria they use in making investment decisions. These criteria are beginning to be computerized and made available to individual investors looking to employ these same strategies.

How investors are using these sites: Validea is a pioneer in this field and publishes premium content to its website and via a newsletter and provides portfolio management services as well. Validea has created computer algorithms to approximate strategies employed by investor heavyweights like Ken Fisher and Peter Lynch and then scans through thousands of stocks to find those companies that would satisfy these pros’ investment criteria.

What it means for IR: Screening technologies are employed by professional investors and are now being filtered down to the retail level. While certain investors are driven by models, the most important part for those in IR is to get their firms into the traditional funnel that begins the stock screen.  Once in the running, make yourself available via a wide variety of media to flesh out the story to investors.

Long tail investment opinion

What is it: As publishing costs have been pushed to zero, amateurs and professionals alike are using blogs to help promote themselves and their businesses.  Employing a traditional editorial filter, aggregators like SeekingAlpha have emerged and collect thousands of the various financial blog postings into a standardized platform.

What’s new: Just a few years ago, investors had just a handful of traditional media sites to check for financial news and commentary.  Employing professional journalists, the focus was on publishing accurate news. Given the cost of publication, sites like Yahoo and Marketwatch focused on just a few hundred of the largest stocks.  The emergence of financial blogging has encouraged bloggers to specialize in analyzing specific fields that don’t exist as such in traditional equity research teams (homeland security, consumer electronics), specific companies (eBay, Apple), and specific geographies.  We’ve essentially moved from the fat head to the long tail of financial content.

How investors are using these sites: SeekingAlpha came out of nowhere and has become one of the largest financial websites online.  With over one hundred daily articles and thousands of smart analysts, SeekingAlpha and its like are convincing investors to turn to these sites to find opinionated commentary (not news).  SeekingAlpha has further democratized financial content by freely diseminating quarterly earnings call transcripts to its community.  See the ranking graph to the right to see how SeekingAlpha is gaining on sites like TheStreet.com and Forbes.com.

What it means for IR: Like expert investment opinion, a whole new class of influencers has emerged with vast reach over a pretty sticky subscriber base.  As IR professionals have traditionally pitched editors of influential subscription research products, bloggers are usurping the power of these longstanding products.Seeking Alpha logo In fact, many of the top Forbes newsletter publishers are turning to SeekingAlpha as a marketing channel. Blog aggregators like SeekingAlpha don’t go away as they become even more important as more blogs are published. Leading IR pros are already turning to the aggregators as this content is showing up on Yahoo Finance, Marketwatch, E*trade, and Reuters. There will be tremendous opportunities for next generation IR to gain exposure via thoughtful products like sponsored interviews and surgically-targeted advertising.

Crowd sourcing

What is it: While expert communities are designed to create a hierarchy in performance to bubble up true investment experts, crowd sourcing technologies are based on research that says that the aggregate opinion of the crowd has statistical significance for investors.

What’s new: The Internet has enabled the creation of affinity investment communities with requisite new tools to extract and monitor sentiment change within the community. Piqqem logo

How investors are using these sites: Still early in their maturation process, investors are going to sites like piqqem and Marketwatch’s Community site to see what the top and lowest rated stocks are as well as searching for the opinion on specific stocks they are interested in. So far, crowdsourcing should be seen as just another input into investment decisions.

What it means for IR: As the opinion of the crowd carries more sway in overall investment decision making, IR pros will need to focus their attention on influencing the view of the crowd. This stands in stark contrast to many IR activities today that focus on garnering the attention of just a limited few investors.

Takeaways for the IR field

I’ve tried to briefly explain a few underpinnings of the recent changes in the investment research process. New Internet technologies, combined with the current environment of consolidation within the equity research community, are empowering investors to consume a lot more information about stocks, albeit via different channels than what we’ve used traditionally. IR professionals must recognize that the early adopters of these technologies and platforms will be followed by critical mass. The after-effects of this evolutionary process entails a shift of power to new influential individuals and online communities. Bloggers and other experts have the ability to hold sway literally over millions of readers. Professionals who understand the new rules of investing and structure their work accordingly have the ability to harness the vast power of these new technologies and platforms.

alphaCLONE launches and takes piggyback investing to the next level

Why create new, unfounded and unproven investment strategies when you can piggyback on top of the world’s best investors instead?  Lots of investors are using the ideas of guru investors like Ken Heebner and Warren Buffett to mimic their investment strategies or build an all-star portfolio based on the best ideas of leading hedge fund and mutual fund managers.  Check out our easy how-to guide for piggyback investing.

tour-ss-full-leaderboardA highly-anticipated website launched today named alphaCLONE.  Mebane Faber, a frequent contributor to SeekingAlpha and fan of endowment investing (Check out his recently published book entitled The Ivy Portfolio: How to Manage Your Portfolio Like the Harvard and Yale Endowments) is one of the co-founders.

According to their launch materials: We built AlphaClone to serve as an intelligent market guide to self-directed investors – both individual and professional.  Given the market turmoil over the last year, there has never beena better time for a service like AlphaClone for investors like you to intelligently research and track how the world’s top investors are deploying their capital in US equity markets.

So, how does it work?

Users can search using a variety of criteria through the portfolios of specific fund managers from over 230 funds tracked by alphaCLONE. Once a user finds a portfolio he/she is interested in (say, Warren Buffet, Carl Icahn, etc.), users are given a variety of tools to monitor performance of current and past holdings, changes to the portfolio (recent buys and sells).  Users essentially “clone” portfolios, or copy them to be able to monitor performance.

Users can not only track individual funds but also pre-defined groups of funds and track the best picks using some type of collective intelligence. One such clone is the Tiger Cubs clone (see it here) that tracks the top picks of hedge fund managers who where former proteges of Julian Robertson, one of the most successful hedge fund managers in history and founder of Tiger Fund Management.

tour-ss-full-berkshirePros of alphaCLONE

  • lots and lots of information on hedge fund portfolios
  • powerful search functionality
  • free version (there is a premium one) is pretty robust
  • predefined groups of funds is a great for idea generation and tracking strategies
  • displays ins-and-outs of positions in the fund and changes in relative weightings
  • great display of things like performance of best stock pick, annualized data, long vs hedged holdings

Cons of alphaCLONE

  • site is very busy and it’s not easy to understand everything that’s going on
  • premium pricing at about $100/month is steep but priced for high end investors
  • OK, I didn’t spend SO long on the site but found it very distracting
  • next step would be to create a real trading platform to implement the strategies developed on the site or plug into existing online trading to for trade execution (like SmartStops has done with Ameritrade).

Piggybacking 2.0

We’ve discussed using StockPickr.com, the first site to make piggybacking easier and more accessible for most of us.  alphaCLONE is StockPickr on steroids.  While both sites suffer from being very busy, alphaCLONE provides better search functionality, broader monitoring of professional portfolios, and tools to help investors both create and track portfolios piggybacking on top of the world’s best investors.

How to piggyback guru investors: a primer

spying1In our last post, Piggybacking guru investors for profit, we explored what piggybacking is (following the every move of uber-investors) and why it’s important (there are a small number of great investors who beat the market over the long term).

So…how does an investor follow the trades of A-list hedge fund investors like Eddie Lampert, George Soros, Ken Griffen or perhaps one of the best investors of all time like Warren Buffett? Continue reading

Piggybacking guru investors for profit

piggyback-by-robert-duncan

Most people who trade relatively frequently don’t realize huge profits.  Their losses typically match their gains, cancelling out much of their activity and racking up transaction costs.

Others, particularly whom I like to refer to as guru investors, just print money. Continue reading