As investors, we are always looking for an edge, and there are many to be had. One of the greatest edges we have as small individual investors is that we don't have to disclose our positions in companies. This is not true for large institutional investors, who must report their holdings to the Securities and Exchange Commission each quarter. These filed reports known as 13-Fs are required for funds with more than $100 million under management. A look at where well-known investors and institutions are placing bets allows us to follow in the footsteps of some of the best.

The Tepper rally
Investors not familiar with hedge fund manager David Tepper should probably thank him for the "Tepper rally" of late September and October, as some are now calling it. During an appearance on CNBC at the end of September, Tepper told the investment community that owning stocks in the near term was basically a risk-free proposition.

Tepper put it like this: "Either the economy is going to get better by itself in the next three months ... What assets are going to do well? Stocks are going to do well, bonds won't do so well, gold won't do as well. Or the economy is not going to pick up in the next three months and the Fed is going to come in with QE [quantitative easing]. Then what's going to do well? Everything, in the near term (though) not bonds ... So let's see what I got -- I got two different situations: One, the economy gets better by itself, stocks are better, bonds are worse, gold is probably worse. The other situation is the Fed comes in with money."

Tepper's public exuberance and bullishness on stocks surprised investors for two reasons. For one, Tepper usually avoids the public eye, rarely ever granting interviews. Secondly, Tepper's Appaloosa Management hedge fund is perhaps better known for its investments in bonds and distressed assets, so the move into stocks is certainly notable.

Tepper became extremely bullish on stocks in 2009, citing government actions back then as well. Tepper overweighted his fund in bank stocks because he believed the Federal Reserve would take any necessary action to prop up the banking sector. In fact, it did, and Appaloosa returned an amazing 132% for the year.

A shift in strategy
Even though Tepper did say that everything will go up because of the Federal Reserve's actions, he did also mention in his interview with CNBC in September that his fund was "not that big in financials right now." As of the end of the third quarter, Appaloosa was even less big in financials. Recent SEC filings show that in the third quarter, Tepper sold shares in nearly all of his fund's financial holdings. While financials still account for a significant portion of Appaloosa's portfolio, clearly Tepper has become even less bullish on the sector. Financial stocks in his top 25 holdings include:

Company

Change in Number  of Shares Held in
Appaloosa Portfolio from Q2 to Q3

Bank of America (NYSE: BAC) (17.8%)
Citigroup (NYSE: C) (11.3%)
Wells Fargo (NYSE: WFC) (18.9%)
Fifth Third Bancorp (Nasdaq: FITB) (18.7%)
SunTrust Banks (NYSE: STI) (18.7%)
Capital One (19.2%)
Hartford Financial (NYSE: HIG) (75.4%)

Source: Capital IQ, a division of Standard & Poor's.

While Tepper was cutting his exposure to financials during the quarter, he was adding some tech names to Appaloosa's portfolio. In particular, he added large-cap tech stalwarts Hewlett-Packard and Cisco (Nasdaq: CSCO) to his holdings.

While HP shares were only down slightly for the quarter, Cisco shareholders can't be happy with the company's recent performance. The company is losing market share and not growing earnings at the same rate as its top competitors. The stock was hit for a 16% loss last Thursday because of the poor report. If it's any consolation for Cisco shareholders, at least you didn't lose close to $24 million on your investment that day; if Appaloosa kept the same stake in Cisco that it had on Sept. 30, it would have lost that much.

Tepper's portfolio activity for the quarter shows how important it is for investors to do their own research, instead of blindly following others. Investors who looked at Appaloosa's holdings near the time of Tepper's comments saw a portfolio in which five of the six largest positions were in financial stocks. Even though he mentioned on CNBC that financials were no longer his favorite sector, those who don't watch financial TV non-stop probably just caught the headlines on his thesis that "everything" will go up. While Tepper hardly became bearish, his large-scale selling in financial stocks certainly does not suggest the buy-anything attitude he expressed at the end of September.

Tepper did nothing unethical, and his exceptional track record is reason enough to continue to watch his moves. However, at the end of the day, Tepper is trying to make money for himself and his investors. So study his moves, but make your own decisions on your own assessments of risk and reward.

Andrew Bond doesn't own shares in the companies listed. The Fool has a bull call spread position on Cisco Systems and owns shares of Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.