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BookingAlpha Option Trading Advisory

Thursday, October 3, 2013

Investing in GURU. Another strategy to beat the markets?

In the never ending quest to achieve better and better results in the markets, some of us, I know I do, spend hundreds of hours per month investigating and studying everything trading-related. To me it really is a hobby. Some time ago I talked about A simple strategy that beats most traders and then after that article I wrote another one trying to enhance that first strategy in Covered Call vs Buy and Hold. Performance comparison.

Today I just learned about a new trading vehicle which, although young, looks promising. Many of you may know it already, but chances are most don't.

This vehicle is an ETF called GURU (more details here) and its short life started on June 5, 2012.
GURU is based on a simple idea: Hold the stocks where the largest hedge funds are more heavily invested.

Taken from the GlobalXFunds website:

...all hedge funds with more than $100 million in U.S. equity investments are required to publish their holdings in a publicly available document called the 13F. The Top Guru Holdings Index uses a proprietary methodology to compile the highest conviction ideas from a select pool of hedge funds where the 13F information is most valuable. 

For example, hedge funds with high turnover are eliminated from the pool. The goal of the Global X Top Guru Holdings Index ETF (GURU) is to aggregate on a quarterly basis the ideas and knowledge of hedge fund managers into the transparent, cost-efficient and easily accessible format of an ETF.

So, the ETF is rebalanced quarterly according to how the weight of the top holdings varied. For a list of the current top holdings inside GURU visit

Up until now GURU has easily outperformed the market since inception (June 5, 2012):
  • From June 5, 2012 to December 31, 2012  GURU  yielded a +15.15% performance. During the same time span SPX went up +11.61%.
  • From January 1, 2013 to today October 3, 2013 GURU has gone up another +27.65% versus only  +17.70% the SPX Index.
The outperformance is certainly impressive. 
Will GURU continue to outperform the market going forward? Obviously there are no guarantees in the market. But its short history so far looks pretty damn good.

As for the ETF itself, the product is still very new, and it is not that popular yet. It is not very liquid, and there are no options to trade it. If you want to play it is basically using the equity directly. But those things might change in the future.

I hope you enjoyed this article and remember, there is no holy grail in trading, nor profits without risks.

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