However, these filings can be hard to find if you don’t know where to look, and they aren’t always released at the same time.
HedgeMind is trying to make this process easier. Launched in 2014 by entrepreneur and serial investor Lex Liao, they’re trying to create a one-stop shop for people who monitor hedge fund activity.
Every time a hedge fund invests in over 5 percent of a company, they’re required to file 13D and 13G filings with the SEC. These filings can also show why the new investment has been made, (such as whether it is a planned hostile takeover, or the buyer simply feels the stock is undervalued). HedgeMind alerts is users to that info, as well as how much has been bought or sold, and compares it to any previous ownership stakes. All of this can happen within 20 seconds of the filing.
Investors can capitalize on this information to validate their trades, see where the smart money is going, and try to anticipate larger market moves, said Liao. “When a hedge fund buys a stock, you know they have done their research. So at the very least, investors know that somebody viewed the stock so strongly that they’re willing to bet their money on it, unlike Wall Street analysts that simply just write and have nothing at risk.”
“That’s the value of following the hedge funds, because its where the money is actually going,” he added. “It’s real, not some paper and not news or rumors.”
HedgeMind also shows a fund’s bullish or bearish sentiment, its latest trades, and their quarterly ownership change of a particular company to gain valuable investment insights.
Investors who seek more in depth analysis of hedge fund holdings can subscribe to HedgeMind’s premium service, which offers proprietary research results based on the latest filings.
For Liao, who’s started and invested in many companies over the years, it just comes down to valuing what hedge funds do with their money.
“We feel the stock trades of hedge funds should be the most reliable source for finding new stock ideas,” he said.