How to let the gurus do your grunt work - JOHN HEINZL

As a psychology and criminology student at Simon Fraser University, Arjun Rudra spends a lot of time probing the human mind.

So it's fitting that before the 22-year-old puts any cash to work in the stock market, he carefully studies the minds of top investment pros.

“I am not trying to be a hero in the investment game,” the Vancouver resident says. “I simply piggyback off the trends and ideas of people I consider to be smarter and more resourceful than myself.”

For years, investors basically had two choices: They could go it alone – a terrifying prospect for many – or they could turn over their savings to a fund manager or financial planner who would invest their money for a fee.

Now, with the Internet making it possible to track the buys and sells of world-class money managers, more investors are adopting a third approach that blends do-it-yourself investing with the peace of mind that comes with having a seasoned expert at the wheel.

Known as copycat investing or coattail investing, it's based on the notion that ordinary investors can generate extraordinary returns by mimicking the moves of the pros, whether they're icons such as Warren Buffett and George Soros or smaller investment firms that generate big returns.

Mr. Arjun, who pens a commodity investment blog under the name Wolf Stone, gets many of his best ideas from Toronto-based Sprott Asset Management. By choosing junior mining stocks from Sprott's holdings, which are updated quarterly on its website, Mr. Rudra has turned his initial investment of $2,000 into $7,000 in less than three years.

“I don't know 50 per cent of what those guys at Sprott know. So to have them on my side is an added benefit,” he says. “It gives me the extra confidence that they've researched the stock and put it in their portfolios.”

Being a copycat investor used to mean spending hours digging through securities commission filings or fund company newsletters in an attempt to glean what others had been buying. But now, financial websites do most of the grunt work for you. The best part: Much of the information is free.

One of the most comprehensive sites is gurufocus.com. Want to know what stocks Warren Buffett bought in the six months to March 31? The site lists nine companies, including health-care giant Johnson & Johnson Inc., drug maker Sanofi-Aventis and railroad operators Burlington Northern Santa Fe Corp., Union Pacific and Norfolk Southern.

Want to know how the stocks have fared since he bought them? Gurufocus.com calculates the gain or loss based on the estimated purchase price. For value investors, there's even a handy tool called “guru bargains” that highlights stocks that have dropped the most since they were purchased.

Many stocks, of course, do the opposite; they soar in price as soon as the public learns of a guru's involvement. In such instances, investors should ask themselves whether it might be wise to wait for a pullback before getting in, lest they overpay for a stock that's suddenly on everybody's radar.

In most cases, you won't learn what the gurus have been doing until several weeks after the fact. That's because they aren't required to file their trades with the Securities and Exchange Commission until after the end of the quarter. Once the information is public, it won't appear on gurufocus.com for another day or two, unless you pay for a premium membership, in which case you get the information within hours of it being published by the SEC.

Another useful feature of the site is the detailed commentaries from the gurus themselves. If you want to probe the thinking of investing legends such as Martin Whitman, chairman of Third Avenue Value Fund, or Bill Miller, chairman of Legg Mason Capital Management, this is the place for you. Warren Buffett's annual letter to Berkshire Hathaway shareholders is here, too.

“Reading the gurus' commentaries, their shareholder letters and interviews is very important. From that you can learn how they invest, how they do valuations of companies and how they understand business,” says Charlie Tian, founder and director of research at Dallas-based gurufocus.com.

A slightly different spin is offered stockpickr.com, which lets investors compare their portfolios to thousands of others, both amateur and professional. The user simply enters a few stock symbols and the site generates a list of similar stocks owned by hedge funds, mutual funds and ordinary investors who have posted their portfolios online.

Still another site worth checking out is coattailinvestor.com, which has a few names you won't find on gurufocus.com.

The key to using all of these websites is to treat them as one more weapon in your investing arsenal, not as a way to make a quick buck, says Cory Janssen, co-founder of Investopedia ULC, an Edmonton-based company that owns coattailinvestor.com.

“It's not a silver bullet or a magic formula, but it's a starting point for you to do more homework and match the gurus out there with your own investment philosophy,” Mr. Janssen says.

For those who want to track every move of the pros, there's also Google Alerts, a service that sends e-mail updates on whatever topic the user chooses. This is how Mr. Janssen stays current with one of his favourite investors, hedge fund manager Eddie Lampert.

“I find out the second anybody's blogged on him or the second he's in Forbes magazine,” he says.

Mr. Rudra agrees that copycat investing isn't foolproof.

Although he gets most of his ideas from fund managers with proven track records, he won't buy a stock until he's done his own research. This usually entails spending several days poring over company filings and brokerage reports.

“I do not recommend people blindly pick any stock they see in a fund portfolio,” he says. After all, even gurus get it wrong sometimes.