Goldman Sachs' Book: Hiding in Plain Sight

The problems are solved, not by giving new information, but by arranging what we have known since long.” – Ludwig Wittgenstein

It turns out, there is a ton valuable data lying around, hiding in plain sight – just waiting for any fool to come along and turn it into something else, something greater. And, it also turns out that I am one such fool who is captivated – perhaps even obsessed – with solving puzzles (like this 8,000-piece beauty purchased – unassembled – at the Louvre, below); turning what usually appears as scraps of data into something much clearer, much bigger, and much more valuable – like a piece of art.

So, you might imagine my excited anticipation to finally work on unlocking some of the value contained in 13F holdings reports. (I know, right?! Who isn’t?) Here’s the gist: Basically, all institutional investors – whether they be public or private entities – with discretion over $100 million or more of US equity assets under management must file a quarterly, position-level report to the SEC.

Now, I am certainly not the first fool to dig into a 13F report or two. For instance, there are websites, like Whale Wisdom or Holdings Channel, that specialize in tracking, assembling and picking some of the obvious nuggets out of the latest 13F filings. However, like most everyone else these days, these services tend to focus on easy-to-harvest, quickly-decaying fragments of limited insight – such as, the top holdings of famous managers, like Warren Buffet, George Soros or Bill Ackman – and which also tend to be geared towards a more retail-oriented audience. Lots of interesting lists, but missing the bigger (strategic) picture – where Alphacution usually looks to plant its flag.

Of course, this type of limited curation can be useful for lots of reasons, but I can’t imagine why it would be all that useful to an institutional audience beyond novelty. For this data to be useful to an institutional audience, we first need to climb to a higher vantage point – and then apply some unique perspective. With that perspective, the nitty-gritty takes on a whole new meaning…

So, with that in mind, what follows is something we have never seen presented before: A “picture” of the entire 13F report for Goldman Sachs Group, Inc. – its most recent, from September 30, 2018 (which was filed at 14:02:40 on November 14, 2018 – a seemingly innocuous tidbit that will become more important down the road).

Now, this chart may seem a little odd at first glance. Of course, this is by design. I want you to stretch your perspective on this by first emphasizing the shape of the portfolio before we get into the weeds around the numbers, such as the total value of this portfolio, the position count, and other fascinating insights that can be harvested from this dataset when viewed by starting with a very wide lens. And, by the way, if we had not used a log scale on the vertical axis, the shape would have been far less illuminating (see chart below) – except to imply a level of value concentration in the top few holdings.

Note also that this particular filing contains the point-in-time positions for the brokerage division (Goldman Sachs & Co., LLC), the asset management division (Goldman Sachs Asset Management, LP), and the market making division (Goldman Sachs Financial Markets, LP) among a few other sub-entities aggregated into the group 13F filings – the positions for all of which can be distilled from the broader filing.

Furthermore, and perhaps more importantly, consider that this same type of exploration can be extended and performed for other secretive and mythological managers, like:

• Citadel
• Millennium
• AQR
• D E Shaw
• Two Sigma
• Susquehanna (SIG)
• Virtu
• and many, many others…

Besides being super cool for students of the game, why is this analysis so important? Well, to understand the value of this data at even slightly deeper levels – and share more pictures, too – we need to talk rather unpredictably about maple syrup first...