Imagine you want to cook a Michelin-star meal. You have two options. You could spend years going to culinary school, mastering thousands of techniques, and experimenting with countless ingredients. Or, you could find the published recipe book of a world-renowned chef like Gordon Ramsay or Julia Child and follow their exact instructions. Investment cloning is the financial equivalent of using that master chef's recipe book. Instead of trying to single-handedly analyze every one of the 10,000+ publicly traded companies, a cloner identifies a small group of investors they deeply admire—investors with decades-long track records of exceptional, value-oriented performance. These are the “superinvestors.” The cloner then systematically monitors their public portfolio disclosures, required by law, to see what “ingredients” they are adding to their portfolios. Cloning is not about day-trading or blindly following hot tips from a TV personality. It's a patient, rational process rooted in a simple, powerful idea: if one of the smartest, most disciplined investors in the world, after thousands of hours of research, decides a company is a wonderful business trading at a fair price, that company is probably worth investigating. It's a strategy of leveraging genius, using the hard work of others as a powerful filter to bring the best ideas to the top of your own research pile.
“I am a shameless cloner… Everything in my life is a result of cloning.”
– Mohnish Pabrai, renowned value investor and a vocal advocate of cloning.
For a value investor, cloning isn't just a clever tactic; it's a philosophy that aligns perfectly with the core principles laid down by Benjamin Graham. Value investing is about buying businesses for less than their intrinsic_value and demanding a margin_of_safety. The challenge, of course, is figuring out what that intrinsic value is—a task that requires immense skill, time, and emotional discipline. Cloning directly addresses this challenge in several ways:
Ultimately, cloning helps the value investor solve the “where to look” problem. It doesn't eliminate the need for independent thought, but it ensures that the time you spend on research is focused on opportunities that have already been vetted by the best in the business.
Intelligent cloning is a systematic process, not a lottery ticket. It requires discipline and, above all, the understanding that the superinvestor's idea is the start of your work, not the end of it.
Here is a step-by-step guide to practicing intelligent cloning:
This is the most crucial step. You are not looking for traders, hedge fund quants, or market timers. You are looking for long-term, concentrated, value-oriented business owners. Your list should be short and well-curated. Think of investors like:
The key is that their investment philosophy must align with yours.
In the United States, any investment manager with over $100 million in assets must disclose their long equity holdings to the Securities and Exchange Commission (SEC). This is done via a Form 13F-HR. These forms are filed quarterly and become public 45 days after the end of each quarter. While you can find these on the SEC's EDGAR database, several free and paid websites aggregate this data beautifully:
Look for significant moves. Don't worry if a superinvestor adds 0.1% to an existing position. Focus on:
This step separates intelligent cloners from gamblers. You've found a great idea. Now, you must make it your own. You need to be able to answer:
If, and only if, you have completed your own research and can confidently explain why the investment is a good idea—independent of the fact that a superinvestor owns it—should you consider making an investment. Your conviction must come from your own work.
The difference between success and failure in cloning lies in your approach. Blindly mirroring trades is a recipe for disaster because you won't have the conviction to hold on during tough times. Intelligent cloning is about using 13F filings as a map to find buried treasure, but you still have to dig for it yourself.
| Cloning Approach Comparison | ||
|---|---|---|
| Attribute | Blind Cloning (The Wrong Way) | Intelligent Cloning (The Right Way) |
| — | — | — |
| Philosophy | “If it's good enough for Buffett, it's good enough for me.” | “Buffett's purchase suggests this is worth my time to investigate deeply.” |
| Action | Buys the stock immediately after seeing the 13F filing. | Starts a multi-week research project on the business. |
| Knowledge | Knows the ticker symbol and the name of the superinvestor. | Understands the company's business model, competitive advantages, and valuation. |
| Conviction | Conviction is “borrowed” from the superinvestor. It's fragile. | Conviction is “earned” through personal research. It's robust. |
| Sell Decision | Panics and sells when the stock drops 20% or if the next 13F shows the guru sold. | Sells only when the business fundamentals deteriorate or the stock becomes severely overvalued. |
Let's walk through a hypothetical scenario. Meet Sarah, a diligent value investor. One of the superinvestors she follows is the fictional “Eleanor Graham,” known for her long-term, concentrated bets in high-quality, understandable businesses. 1. The Filing: In mid-February, Sarah is reviewing Eleanor's 13F filing for the quarter that ended December 31st. She notices a major new position: Eleanor has allocated 8% of her fund to a company called “Steady Spices Co.” (Ticker: SPC). This is a significant move that catches Sarah's attention. 2. Initial Triage: Sarah has never heard of SPC. A quick search reveals it's a 100-year-old company that sells a portfolio of dominant spice and seasoning brands to supermarkets. It's a simple, “boring” business—exactly the kind of thing Eleanor Graham likes. The stock price hasn't done much for two years. 3. The Deep Dive (Her Own Homework): Sarah doesn't buy the stock. Instead, she spends the next two weeks researching Steady Spices Co.
4. The Decision: After completing her own due diligence, Sarah agrees with Eleanor's apparent thesis. Steady Spices Co. is a high-quality business with a durable brand, facing temporary headwinds that have created an attractive price. She now has her own conviction. She buys a small position in SPC, comfortable in her knowledge of the business she now partially owns. When the stock later drops 10% on a bad quarterly report, Sarah doesn't panic. She re-reads her research, concludes the long-term thesis is still intact, and considers buying more. Her conviction is her own, not Eleanor's.