Cribbing From the Best

For a fertile source of investing ideas, look at what other smart investors are doing.

Successful investors prospect for new ideas in a wide variety of ways. They scour databases for undervalued companies. They tap industry contacts for early signs that things are getting better for a company or a sector. They read voraciously and draw from deep experience to see patterns and opportunities that others are missing. For some savvy practitioners, a fertile source of investing ideas is to look at what other smart investors are doing.

Spilling the beans. Every quarter, money managers with more than $100 million in assets must file a form with the Securities and Exchange Commission that details the U.S.-traded stocks they own. The disclosure lets you figure out what they’ve been buying and selling. Filings are made up to six weeks after the end of the quarter, so the information is less useful than if it were in real time. But a review of the data can provide insights into where opportunities may reside. As Bruce Berkowitz, manager of Fairholme Fund, a member of the Kiplinger 25, says, “Why wouldn’t you look at what other great investors have found?”

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Whitney Tilson
Contributing Editor, Kiplinger's Personal Finance