Buys are ambiguous. A fund can add to a position for a dozen reasons — rebalancing, inflows, a hedge. A complete exit is different: it is a decision with no half-measure. So we measured it separately.
The test. Same 83 funds, same five years. A signal fired when three or more funds that held a stock in one quarter held none of it the next. We measured returns from the filing deadline, exactly as in our buy test. 190 exit signals occurred; 130 had complete price data (the rest were mostly delisted or unmapped names — a survivorship caveat we flag below).
The result.
- Dumped stocks' average return next quarter: +0.66%
- S&P 500 over the same windows: +4.60%
- Excess return: −3.94 percentage points
This is not a crash signal. The dumped stocks still went up on average — they just went up far less than the market. Of every signal we tested — crowded buys, tripled positions, exits — the exit was the strongest, and it wasn't close (−3.94 vs −0.54 and −1.55 points).
That asymmetry makes sense once you think about who is selling. A fund exiting entirely has usually finished its homework: the thesis broke, the numbers changed, or something better appeared. The filing arrives up to 45 days late, and even with that delay, the underperformance persisted into the following quarter.
The honest caveats. 60 of 190 exit signals couldn't be measured because the stocks delisted or lacked price data — and delisted stocks are usually the worst outcomes, so the true figure may be worse than −3.94. Exits can also be mechanical (fund closures, index changes), which adds noise in the other direction. We report it as we measured it.
If you read 13Fs, read the exits first.
Data: SEC Form 13F filings, 83 funds, 2021Q3–2026Q1. Methodology and full scoreboard on our Track Record page. Not investment advice.