Let’s create a portfolio that holds the top stock ideas of the smartest, best informed, best performing hedge fund managers in the world. We won’t pay hedge fund fees, nor will our money be “locked up.” We’ll rebalance this portfolio quarterly, so it always owns the highest conviction ideas of the most elite funds. Is this possible? Yes, we can do it by cloning the WhaleIndex® 20.
The WhaleIndex® 20 tracks the highest-conviction stocks held by leading hedge fund managers. Who are the best hedge funds currently? Names like Dorsey Asset Management, Altimeter Capital, Foxhaven Asset Management, Night Owl Capital, and Abdiel Capital are a few of the funds on the elite list.
WhaleWisdom uses a proprietary scoring system — the WhaleScore — to determine the best performing managers. WhaleWisdom tracks all managers who file 13F regulatory filings with the SEC and ranks the managers based on WhaleScore. Measures exhibiting the strongest relationship with Alpha prediction are determined through regression analysis. Filers are ranked in terms of these metrics and scored against each other and against the S&P 500.
To qualify for a WhaleScore, a fund must have the following attributes: between 5 and 750 holdings in its 13F filing, at least 3 consecutive years of quarterly 13F filings, hold five or more stocks in its portfolio, manage more than $100 million in marketable securities, and hold at least 20% of its portfolio in its top 20 stocks. Funds considered to be a bank, trust, pension, or insurance company are excluded.
The WhaleIndex® 20 tracks the 20 most commonly held stocks disclosed in the quarterly 13F filings of these consistently successful managers. The index is equal-weighted and rebalanced 46 days after the end of each quarter.
The WhaleIndex® 20 is up 76.44% YTD. Since 2006, it’s returned 20.74% annually.
If you replicated the WhaleIndex® 20 since 2006, rebalancing quarterly as the top funds and their best ideas changed, you would have achieved a 20.74% annual return. That’s more than double the S&P 500’s total return over the same period. The WhaleIndex® 20 is up 76.44% YTD.
Here is the most recent WhaleIndex® 20 portfolio, rebalanced on Nov. 16, 2020.
| Name | Ticker | Market Cap 1 | Date Added | Return 5-day | Return 1 Month | Return YTD | Return All-time |
| Alibaba Group Holding Ltd ADR | BABA | $732.52B | 11/16/20 | 0.95% | 2.13% | 2.13% | 2.13% |
| Alphabet Inc. Class C | GOOG | $1.17T | 11/16/18 | -2.40% | 1.20% | 30.48% | 68.08% |
| Amazon.com Inc. | AMZN | $1.55T | 5/17/16 | -3.10% | -1.26% | 63.55% | 346.47% |
| Apple Inc | AAPL | $2.03T | 5/18/20 | -1.06% | 4.69% | 54.94% | 54.94% |
| Charter Communications Inc | CHTR | $134.29B | 11/18/19 | -3.46% | 5.04% | 31.33% | 35.86% |
| Facebook Inc | FB | $768.18B | 8/17/15 | -3.34% | -0.30% | 32.48% | 195.88% |
| Mastercard Inc | MA | $322.00B | 8/17/20 | -0.99% | -2.24% | 2.12% | 2.12% |
| Microsoft Corp. | MSFT | $1.591T | 8/17/15 | -1.66% | -3.02% | 32.91% | 395.75% |
| Moodys Corp | MCO | $51.25B | 8/17/20 | -0.95% | -0.04% | -2.73% | -2.73% |
| Okta Inc | OKTA | $29.80B | 8/17/20 | 0.94% | 6.90% | 16.35% | 16.35% |
| PayPal Holdings Inc | PYPL | $225.75B | 11/16/20 | -0.83% | 9.83% | 9.83% | 9.83% |
| Pinduoduo Inc | PDD | $171.92B | 11/16/20 | 2.44% | 3.90% | 3.90% | 3.90% |
| Salesforce.com Inc. | CRM | $234.82B | 8/16/19 | -0.10% | -14.93% | 32.09% | 53.29% |
| Sea Ltd ADR | SE | $90.45B | 8/17/20 | 10.22% | 19.87% | 50.94% | 50.94% |
| ServiceNow Inc | NOW | $101.07B | 5/17/18 | 0.28% | 5.19% | 81.29% | 207.49% |
| Shopify Inc | SHOP | $120.51B | 2/16/17 | -3.82% | 15.02% | 154.58% | 1602.79% |
| Square Inc | SQ | $88.37B | 11/18/19 | 2.50% | 12.47% | 224.36% | 214.94% |
| Twilio Inc | TWLO | $47.87B | 5/17/18 | -2.43% | 14.07% | 203.00% | 481.69% |
| Uber Technologies Inc | UBER | $85.42B | 11/16/20 | 1.32% | 9.31% | 9.31% | 9.31% |
| VISA Inc | V | $446.82B | 5/18/20 | -0.29% | -1.46% | 9.68% | 9.68% |
Several of the holdings in the WhaleIndex® 20 were originally added as far back as 2015.
Note that the top consensus holdings of the best performing hedge funds included ten stocks held for over a year. Indeed, four positions were added before 2018. The best performing position, Shopify Inc (SHOP), has gained over 1600% since being added on Feb. 16, 2017.
Also, there is definitely a large cap tilt to the WhaleIndex® 20. The smallest holding by market capitalization is Twillio Inc. (TWLO) at $47.87B.
If you’re interested in applying a similar approach to smaller cap stocks, WhaleWisdom there’s the WhaleIndex® Micro/Small/Mid Portfolio. The WhaleIndex® 100 uses the same metrics, and reflects the top hundred stocks most favored by the leading fund managers.
For anyone interested in creating and backtesting their own strategies based on WhaleScores, WhaleWisdom offers the capability to create one’s custom portfolio of top holdings by leading managers. Using the 13F Backtester, one can create custom strategies and backtest how various combinations of hedge funds and portfolio criteria would have performed historically based on 13F filings.
Disclaimer:
This investment blog (the “Blog”) is created and authored by Mark W. Gaffney (the “Content Creator”). The Blog is provided for informational and entertainment purposes only (collectively, the “Blog Service”). The information in the Blog constitutes the Content Creator’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You understand that the Content Creator is not advising, and will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information contained in the Blog may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
From time to time, the Content Creator or its affiliates may hold positions or other interests in securities mentioned in the Blog. The Content Creator or affiliates may trade for their own account(s) based on the information presented, and may also take positions inconsistent with the views expressed in its messages on the Blog.
The Content Creator may hold licenses with FINRA, the SEC or states securities authorities. These licenses may not be disclosed by the content creator in the Blog.
Investing in the investments discussed in the Blog may be risky and speculative. The companies may have limited operating histories, little available public information. The stocks discussed may be volatile and illiquid. Trading in such securities can result in immediate and substantial losses of the capital invested. You should only invest risk capital not required for other purposes, such as retirement savings, student loans, mortgages or education.
