What would an equal-weighted portfolio of David Einhorn's top 10 stocks would've looked like over the last 3 years?
Not a bad perforance at all, despite losing money in 2011, but keep in mind that the various L/S Equity HF indices were down between 5 and 6% in 2011... so relatively, this strategy would've done OK.
When creating replicated portfolios for clients we always advocate against cloning the top positions of just 1 filer (for a variety of reasons). But replicating the top positions of a handful of well-chosen filers is a very robust way to construct a low-turnover, highly liquid portfolio of outperforming stocks over time.
It's crucial, however, to choose appropriate filers to replicate. Many of the "famous" hedge fund managers (such as Paulson) run portfolios that are simply not conducive (and in fact dangerous) to apply this methodology.
Because we're relying on 13F information about past positions to convey useful information in the future, managers that tend to hold big positions over time are better suited for this approach. Also, it's preferable if the 13F covers a large portion of their portfolio. John Thaler's new fund, JAT Capital, had a phenomenal year BUT it runs a very low net exposure consistently...so we're only seeing 50% of the total portfolio...and replicating only the long book of a strategy like this can be extremely dangerous.
That said, replicating positions of certain filers (many actually aren't hedge funds at all) can be a very robust strategy over time.