A Tool in the Investor Toolbox: the Mighty 13F

Investors rely on a myriad of tools to help them make wise investment decisions. A 13F form can be an important tool.

While it would seem to offer a lot of beneficial data, such as what kinds of decisions the big-time investors are making, there are also some drawbacks to relying too heavily on this information. In this video segment, Motley Fool's Gaby Lapera and John Maxfield answer the question, "What are 13Fs?" and discuss the risks of giving them too much weight.

Listen to the full podcast by clicking here. A full transcript follows the video.

This podcast was recorded on 11/23/2015.

John Maxfield: A 13F is like Gaby said... if you're an investor, and let's say you love Warren Buffett or Howard Marks, or somebody like that, and you want to figure out what they're buying, what they own, things like that.

You go to the 13F because that is where every quarter within 45 days, after the end of a calendar quarter, big institutional money managers must file with the SEC a form that basically says what stocks they own, and how much of them they own.

Gaby Lapera: Yeah, and they're really exciting because, like Maxfield said, if you're a really big fan of these guys, you can kind of see what their portfolios look like. So I have Oaktree Capital's (OAK) pulled up right here, and it looks like, for example, their top buy this time was Jazz Pharmaceuticals. Top sells were Allergan; those are both biotechs. I know that we're a financial show, but sometimes we talk about other sectors, too. And it also has a breakdown of what their sector allocation is.

So most of their stocks are in information technology. It's pretty interesting stuff. You can find this online at whalewisdom.com. Just go Whale Wisdom, search for whatever company you're looking for that has institutional investments -- so that's banks, insurance companies, obviously these capital management firms. It's a pretty helpful tool for investors.

Maxfield: Yeah, I find it's a totally helpful tool for investors; but you have to keep it in context, right? Because one of the things you have to keep in mind about 13Fs is that they aren't filed until the end of the quarter -- until 45 days after the end of the calendar quarter, right?

So a lot of these investment decisions will have already been, you know, they will be stale by a few months by then. Which, by that time, the valuations and the prices of those investments could change. And the other thing to keep in mind with 13Fs, just as a caveat, is that there are procedures that a big institutional money manager can go through to then not actually report specific holdings in a particular quarter. And let me give you an example. So back in 2011, Warren Buffett -- I think it was 2011 -- Warren Buffet went against his long-held belief that he should avoid technology stocks, and he invested in IBM.

Well, as he was building that position, if it was straddling two different quarters, he's not going to want to come out in the middle of that as he's building that position and say, "Look I'm buying all these billions of dollars worth of IBM." I think he owns something like 8.3% right now, right? Because that would cause the price to skyrocket immediately.

So what he does is, he applies with the SEC, or Berkshire Hathaway (BRK.A 0.36%) (BRK.B 0.21%) does this, and he says, "Look, let me report this, but let me delay reporting this another quarter so I can build my position first and then let people know." So it's just a good thing to keep in mind for investors that sometimes the data is either stale slightly, or it could not be telling you everything that you think it should be telling you.

Lapera: Absolutely, and this goes back to the Motley Fool's general investing philosophy, which is that you need to do your research before you buy, right? You can't just depend on other people just to tell you things, right? You really need to make up your own mind.