How to Replicate Hedge Funds Success With 20 Stocks or Less

Is replicating hedge funds a profitable endeavour? This has been a topic frequently debated in media. We will look at some actual data to see potential performance and possible replication strategies.

Update 2020: After reviewing feedback from customers, hedge fund data has been removed from the kinfo platform to focus more on individual trading metrics for day traders and swing traders.


Which hedge funds are possible to replicate?

One thing is certain; the opinions about hedge funds are strong and there is no shortage of articles either criticizing or defending the hedge fund industry. Hedge funds have been criticized for their high fees and low performance.

In 2008 famous investor, Warren Buffett even went as far as placing a bet of 1 million dollars against Protégé Partners LLC, hedge funds that invests in other hedge funds. Buffett contended that, including fees, costs and expenses, an S&P 500 index fund would outperform a hand-picked portfolio of hedge funds over the 10 years ending December 31, 2017. In less than a year comes the verdict and as it looks now Buffett will win.

At the same time, we can read about hedge funds achieving stellar performance, hedge funds such as Renaissance technologies, known for only employing hardcore mathematicians and scientists, show extraordinary returns, though very secretive about their methods. We do know that they rely on technologies such as data mining, machine learning and predictive analysis rather than traditional stock picking by a human analyst.

So can anyone replicate the RenTec portfolio since they file holding quarterly to the SEC like any other hedge fund? The short and simple answer is no, their portfolio as of their latest filing consist of 3218 positions.

Diversification is a cornerstone of any sound investment strategy. However, this poses a problem for those investing in individual stocks. Repeatedly buying and selling stocks drives up brokerage fees and tax liability. For this reason, many investors distance themselves from the strategies of hedge funds, which hold hundreds of positions. However, analytics of KINFO are challenging this misconception. Some of the hedge funds in our system carry just 20 positions or fewer.

Building a Winning Team

Recent filings have revealed the ways in which some managers excel with a concentrated portfolio of a few high performers. Lindsell Train Ltd exemplifies this focused approach. Filings show that their total of approximately eleven positions has delivered a yearly return of 18.3%. This performance outpaces even the surging S&P 500.

Why is this performance impressive? The answer is two-fold. Not only has Lindell outperformed the S&P 500 since the first quarter of 2015 they have done so with a manageable team of winning companies. This strategy means KINFO users can realistically seek to mimic the Lindell’s out performance without incurring heavy trading fees.

How harmful are brokerage fees? Research published in The Journal of Finance reveals the answer. “The average household turns over approximately 75 percent of its common stock portfolio annually. The poor performance of the average household can be traced to the costs associated with this high level of trading,” remark the writers.

This big picture approach is especially important for investors keeping an eye on insider trading. Why? Sometimes insiders are exercising stock options. This activity reflects on disclosed reporting as both a buy and sell. For this reason, viewing insider trades in isolation can be misleading.

Lindsell Technologies is a top performing hedge fund with positions in Facebook, Southwest airlines and Apple

Managing Risk

The reasonable counter-argument to such a small portfolio is that it fails to diversify risk. It is true that more holdings will reduce volatility. However, the outperformance of these portfolios succeeds in delivering on the risk/return expectation. That is, investors following Lindell’s strategy are rewarded for taking on the additional risk of such few holdings.

There are other hedge funds in the KINFO system exhibiting the same phenomenon. VGI Partners holds just ten positions. Again, the portfolio of just a few holdings rewards investors with the outperformance of the S&P 500. The managers delivered a yearly performance of 14.9% beating the street since the third quarter of 2015.

VGI Partners is a top performing hedge fund with less than 20 positions

Greenbrier Partners Capital Management LLC has enjoyed a similar strategy of focused wealth generation. With only sixteen total positions they have earned a yearly return of 16.4% with more than two years of out earning the overall market.

Greenbrier Partners Capital Management LLC is a top performing hedge fund with less than 20 positions

Making It Work For you

The power of KINFO is the breadth of our analytics. Investor wary of placing their bets on just a few stocks can create their portfolios of companies shared among the highest performing hedge funds. By clicking on each company held within a hedge fund, investors can learn what other funds hold the same security.

This info opens the door to even greater research. Investors can watch how the big market players increase or decrease their holding of a particular company. This data, when viewed holistically across several funds, reflects broad trends. Moreover, investors can inform their decisions by watching how differing funds weight the stock in question.

The analytics and number crunching within the hedge funds might be complicated. However, your strategy doesn’t need to be. Start by examining the funds with fewer positions if you want to attempt to replicate the success of hedge funds. This approach makes getting started more manageable.

Filter out top hedge funds

KINFO makes it very easy to find the top performing hedge funds out of around 2000 who currently file their holdings to the SEC.

Easily sort out top performers out of 2000 hedge funds

What to look for

In the positions view you can overlook the hedge funds complete portfolio of Stocks/ETFs/Mutual funds. Each position will also show the allocation in percent of their total amount. Looking at change you can easily spot if a hedge fund has increased or decreased their position as of the latest filing.

Get an overview of allocation in the positions view. Change will show if the hedge fund has increased or decreased their position


KINFO tracks all hedge funds and shows you the performance of a portfolio which trades and re-balances according to the hedge funds filings. By filtering out the top performing hedge funds with a manageable amount of positions you can get valuable insight into data otherwise inaccessible to private investors.


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