Where Are The Big Money Managers Putting Their Money?

By Aaron Levitt | December 03, 2012 AAA

Given how hard it is to generate market beating returns year after year, many investors continue to search for any kind of edge that will give them a leg up on the stock market. Not satisfied with owning index funds like the SPDR Dow Jones Industrial Average (ARCA:DIA) and following the tenants of plain index investing, many are taking an active role in portfolio construction. With the birth of the Internet and a host of financial media outlets available, following the lead of endowments and market gurus has never been easier. Individuals are now able to model their own portfolios after some of the biggest names in the game.

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The key is by looking at simple cheat sheets that all hedge fund, institutional and pro money managers must fill out with the Securities and Exchange Commission (SEC). The quarterly report that money managers with over $100 million in equity holdings must fill out is the SEC Form 13F, and it's basically a free glimpse into what the most successful money managers and investors are buying and selling each quarter. By reading some of the world's biggest investing superstars' 13F, investors can see just how the smart money is positioning themselves, and transition into coattail investing.

However, digging through all of those filings can be a daunting task. Luckily, we here at Investopedia have done the leg work for you and present some of the biggest market pundits' latest calls and how you can profit from them.

America's Favorite Billionaire
When he's not campaigning for higher taxes on the rich, Berkshire Hathaway's (NYSE:BRK.A, BRK.B) bespectacled billionaire Warren Buffett does a fair bit of investing. The legendary value investor guided Berkshire's $75 billion portfolio into a handful of new positions this past quarter.

The key theme for Buffett seems to be heavy duty American industrial might and manufacturing. According to his latest 13F, Berkshire's buys this past quarter included agriculture giant and tractor maker Deere (NYSE:DE), metal component producer Precision Castparts (NYSE:PCP) and WABCO Holdings (NYSE:WBC). WABCO makes a series of electronic, mechanical and mechatronic products for commercial truck, trailer, bus and passenger car manufacturers worldwide.

While these new stocks make up a small percentage of Berkshire's total portfolio, the stocks' leadership status in their respective fields makes them quintessential Buffett picks, and are great ways start building your own baby Berkshire.

Big Bets on Gold
Billionaire hedge fund managers George Soros and John Paulson may not run the same funds, but they are thinking in the same vein. Both are making a calculated bet that all the debt, quantitative easing programs and global uncertainty will continue to push gold prices up in the near future. Adding in the current fiscal cliff mess and it's easy to see why both billionaire managers have added a hefty dose of gold exposure to their portfolios.

Paulson currently has SPDR Gold Shares ETF (ARCA:GLD) as his top holding, and the fund accounts for 29.53% of his portfolio. Soros - who also added to the gold exchange traded funds (ETF) - took his love affair with the precious metal one step further and added exposure to the miners of the metal via ETF. This includes large - 2.4 million share each - stakes in the Market Vectors Gold Miner (ARCA:GDX) and Junior Gold Miner ETF's (ARCA:GDXJ) as well as the SPDR Metals & Mining ETF (ARCA:XME).

If you already have an interest in investing in gold, you may want to consider following in the footsteps of Soros and Paulson, but just make sure you fully understand the dangers of coattail investing.

Value in Tech
Like Buffett, Whitney Tilson is a serious value investor. Aside from managing T2 partners, Tilson is also the co-founder and Chairman of the famous Value Investing Congress - an investment conference that takes place twice per year - as well as the editor-in-chief of investment newsletter Value Investor Insight. He has based his whole career around finding polished stones in the market.

Today, Tilson is seeing value in technology stocks. His 13F showed that he increased his stake in tech darling Apple (Nasdaq:AAPL) via call options and shares. He also increased his stake in Netflix (Nasdaq:NFLX), which is a reversal of his former short on the shares. The hedge fund manager also sees plenty of value in other beaten up old tech giant Dell (Nasdaq:DELL).

The Bottom Line
For regular retail investors, following the lead of various guru and superstar investors is a great way to formulize a portfolio strategy and ultimately beat the markets. The best way to catch up on what the smart money is doing and thinking is through the required 13F filings with the SEC. The previous examples are just some of the ideas floating around and could be used to strengthen an individual's portfolio.
At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.

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