If you want to invest like a hedge fund manager, now’s the time to put your money in transportation, computer technology and housing stocks.
Hedge funds are usually off-limits to the average Joe due to excessive fees. But AlphaClone’s ETF ALFA attempts to replicate successful fund strategies. And the method is completely automated. In a proprietary analysis, ALFA tracks more than 300 hedge funds by examining their mandatory 13 F-HR quarterly disclosures. The fund managers are given “clone” scores. ALFA mimics the funds of managers with the highest score.
As of now, Maz Jadallah, founder and chief executive of AlphaClone, said fund managers like the computer technology sector. In fact, Apple was the most popular hedge-fund holding for a while, until it fell out of grace as the stock tumbled. Other fund-manager favorites include AIG, which slipped in and took first place, followed by Google. Apple remains the number three most popular hedge-fund holding, despite a 40 percent decline since its high last September.
Transportation is another favorite among fund managers, as well as construction, as the housing recovery gains steam.
ALFA Clone Alternative Alpha ETF is up 10-percent year to date. But if you’d rather invest in a sector ETF, you might consider the Technology SPDR ETF. It’s up 2 percent for the past year, which would have been higher if Apple had not been its top holding. For a housing play, iShares Dow Jones US Home Construction ETF brought investors a whopping 63-percent return for the past 52 weeks, and is up 13 percent year-to-date.
On the flipside, hedge funds are underweight consumer staples and utilities.
Finally, Jadallah said investors should build an actionable, repeatable investment strategy not impacted by emotion. Choose an investment horizon of three years, and never trade on emotion. Follow those three rules, and you should be OK as an investor, he said.