Psst? Want a stock tip from…Carl Icahn?
Or perhaps the thrills and quick moves of a corporate raider like Icahn don’t fit your style, but you’d love to buy and hold with a more conservative Warren Buffett?
Well, a convenient new ETF combining the consensus investment choices of billionaire investment mavens like Daniel Loeb, David Einhorn and Seth Klarman and an accompanying mobile app makes following the smart money easier than ever.
The new Direxion iBillionaire Index ETF (IBLN), which began trading Friday, is based on the iBillionaire Index (NYSE:BILLION), which tracks the performance of the investment buy and sell decisions of high-profile investors like Buffett.
Yes, this was always possible to do, since by law every institutional investor with investment discretion over $100 million or more is required to report portfolio holdings every three months to the Securities and Exchange Commission.
Savvy institutional investors have long combed these Form 13F filings for insights into the investing decisions of hedge fund managers and the like.
What’s new here is putting that information into the hands of ordinary people, and packaging it into an investment for those interested in following billionaires’ investment advice passively.
The brainchild of iBillionaire founder Raul Moreno, the index’s purpose is to level the playing field between Wall Street and Main Street.
“Our goal is to democratize information that was only available to investment banks and very sophisticated investors in the past,” Moreno told ThinkAdvisor in a phone interview. “It’s easy to understand and easy to follow. And hopefully now with our partnership with Direxion, it’s easy to invest in.”
Moreno created software that “immediately and automatically” conveys the portfolio changes reported in 13F and related forms and schedules.
“We send out notification to users of our mobile app,” which he says is available at no cost to anyone — you don’t have to own shares of the ETF.
Indeed, for a new index that many professional investors have yet to heard of, the app is already barnstorming Main Street.
“iBillionaire is the index provider with the largest mobile community in the world,” Moreno says proudly.
Launched just 18 months ago, the app has already been downloaded by 140,000 people, with about 70% of users in the U.S. and the rest mainly in China and Australia, Moreno says.
“If you look at reviews of the app, we are appealing to broad audience,” Moreno adds, citing college kids trying to get a leg up on investing, “moms trying to get their kid in college” through savvy portfolio strategies — all the way to a [professional] managing $500 million for Morgan Stanley who says ‘it’s helping me to know what these [billionaires] are doing.’”
Beyond even pros at Morgan Stanley, the subscriber base includes three of the billionaires whose investments are tracked.
“I can’t say whom, but they like to know what the other one is doing,” Moreno says.
So how are these investors doing?
The iBillionaire founder says he conducted a back test of his portfolio with the New York Stock Exchange in which the billionaires bested the S&P 500 by more than double in the five years through November of last year.
Since the index launch last year, “the index is up 12.76% compared to 9.30% for the S&P,” Moreno says.
Timing-wise, the ETF’s debut coincides with a falling market, which could adversely affect performance of the index given its allocation.
“Risk-wise we are similar to the S&P; when markets go down, we go down. The upside is what really differentiates our performance,” Moreno says, adding that the billionaires he tracks are essentially trying to beat the S&P 500, so that’s the goal of the index.
While the mobile app tracks the moves of 20 different billionaires active on Wall Street — including Warren Buffett, George Soros, Carl Icahn, John Paulson, Daniel Loeb and David Einhorn — the index tracks just 10 of the billionaires — essentially those whose investment decisions have performed best according to iBillionaire’s propriety model.
The identifies of those 10 are also proprietary, but one can view portfolio data on Direxion’s site, which shows that Williams Cos., Micron Technology and Apple are the current top holdings.
“We said let’s create a strategy where we hold 30 large-cap companies where billionaires invest the most assets,” Moreno says, adding that each of the 10 billionaires is equal-weighted in the portfolio — so every holding has the same weight, 10% for each billionaire.
“Sometimes they have contradicting views, so putting them together you get a consensus of 10 of the most brilliant minds in finance,” he says of his diversified billionaire portfolio.
“Buffett is anti-technology, but Icahn's bullish on tech, so mixing them together you get the best of both worlds.”
Moreno says iBillionaire removes billionaires with more than 50% turnover in order to focus on long-term equity performance. The index rebalances quarterly, and Moreno rotates his 10 billionaires annually.
To those for whom this quarterly and annual reshuffling is too mellow, the app can serve their adrenaline needs.
“When Carl Icahn bought shares of Family Dollar, we sent out notification to users in an e-mail,” Moreno says. “Earlier this week it was announced that Family Dollar was bought by Dollar Tree, and the day after he sold his position [in Family Dollar], we sent out notification of that too.”
Investors can also play with the app for their own research or amusement, plugging in, say, Starbucks, to see which billionaires own the coffee company and how much of it they own, Moreno adds.
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