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13F Filings – Don’t Follow Warren Buffett Blindly

Don't go bottom fishing just because some big investor told you to


This week, the media focused on money managers and hedge funds’ latest 13F reports for the Securities and Exchange Commission, which show the positions large investors hold at the end of the quarter. Additionally, 13F SEC filings include quick comparisons to the prior quarter that reveal what some of the leading fund managers have been buying and selling. Commentators have been rushing report on the second quarter 13F reports of Warren Buffett, Bill Ackman, Carl Icahn and other famous investors.

Even though celebrity 13F reports can be interesting and informative, the tendency for retail investors to blindly follow the likes of Warren Buffett, Bill Ackman, and Carl Icahn can be misguided.

Fortunately, we have a tool to help us separate the wheat from the chaff when evaluating the institutional darlings. When I applied Portfolio Grader rankings to some of the stock on the Goldman Sachs (GS) top hedge fund holdings list, I found some great stocks with sparkling fundamentals that would be solid additions to your portfolio. I also found a fair amount of bottom fishing in broken stocks that you should avoid at all costs right now.

Here’s what Portfolio Grader has to say about the stocks that hedge funds and other large investors bought in the second quarter:

Portfolio Grader gives “A” rankings to Apple (AAPL), Visteon (VC), Micron (MU), Actavis (ACT), Facebook (FB) and Delta Airlines (DAL). All of these stocks are “strong buys” and should lead the market and your portfolio higher.

Portfolio Grader gives “F” rankings to General Motors (GM) and Citigroup (C ). These stocks are “strong sells” and to be avoided because their poor fundamentals are likely to lead the stock price lower in the second half of 2014.

Lastly, don’t bottom fish for Amazon (AMZN), American International Group (AIG), Bank of America (BAC), CBS (CBS) and JPMorgan (JPM).

Unless you have the ability to call Warren Buffett, Bill Ackman, or Carl Icahn and ask them to explain their rationales and strategies for investing in particular stocks, focus on the fundamentals before copying big investors. Using Portfolio Grader, retail investors can filter the best stock ideas from famous 13F filings to power out portfolios and avoid those stocks with poor fundamentals and prospects that could drag down portfolio performance.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

Article printed from InvestorPlace Media,

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