The best time to invest in Ken Heebner’s CGM Funds is not when he just finished a year beating the market by more than 70% and appeared on the cover of Fortune Magazine. It is probably a better time to invest in his fund when he underperforms.
This is one of the times. After beating the market by 74% in 2007, CGM Fund now ranks at the bottom of the mutual funds, although he still averaged more than 15% for the last decade, when the market was negative. He continues his poor performance this year. According to the latest shareholder letter of the fund, CGM Mutual Fund declined -13.3% during the second quarter of 2010 compared to the Standard and Poor’s 500 Index which lost -11.4% and the Merrill Lynch U.S. Corporate, Government and Mortgage Bond Index which increased 3.5% over the same period. For the first six months of the year, CGM Mutual Fund returned -10.8%, the Standard and Poor’s 500 Index, -6.7%.
CGM Mutual Fund was approximately 28% invested in government and corporate bonds at quarter end. The three largest positions in the equity portion of the portfolio were in the auto and related, heavy capital goods and electronic components industries. The Fund’s three largest equity holdings were Ford Motor Company, Apple Inc. and Delta Air Lines, Inc.
This is the review of Ken Heebner’s top holdings as of June 30, 2010.
No. 1: Ford Motor Company (NYSE:F), Weightings: 10.87% - 59,330,000 Shares
Ford Motor Company produces cars and trucks. The company and its subsidiaries also engage in other businesses, including manufacturing automotive components and systems and financing and renting vehicles and equipment. Ford Motor Company has a market cap of $42.34 billion; its shares were traded at around $12.31 with a P/E ratio of 7 and P/S ratio of 0.4.
Heebner got in Ford in the second quarter of 2008. Then he realized it is too early, and he sold the positions in the first quarter of 2009, and bought into again. The stock prices of Ford have recovered more than 5 times from the bottom.
No. 2: Apple Inc. (NASDAQ:AAPL), Weightings: 5.27% - 1,151,600 SharesApple Computer, Inc. designs, manufactures and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers. Apple Inc. has a market cap of $263.95 billion; its shares were traded at around $288.92 with a P/E ratio of 21.7 and P/S ratio of 6.1. Apple Inc. had an annual average earning growth of 83.1% over the past 5 years.
Heebner has been in and out of Apple a few times before 2009. He bought into it again in the third quarter of the last year, and has since doubled the money with this position.
No. 3: Delta Air Lines Inc. (NYSE:DAL), Weightings: 4.26% - 19,952,000 SharesDelta is America's fastest growing international carrier. Delta Air Lines Inc. has a market cap of $8.93 billion; its shares were traded at around $11.32 with a P/E ratio of 53.9 and P/S ratio of 0.3.
Ken Heebner bought into Delta Airlines in the first quarter of this year at the average cost of $13. He is slightly down with this stock.
No. 4: SanDisk Corp. (NASDAQ:SNDK), Weightings: 3.97% - 5,195,000 SharesSandisk Corporation designs, manufactures, and markets flash memory storage products that are used in a wide variety of electronic systems. Sandisk Corp. has a market cap of $8.22 billion; its shares were traded at around $35.28 with a P/E ratio of 9.3 and P/S ratio of 2.3.
Sandisk is a new position for Heebner. He never invested in the company before. He bought into the position in the second quarter at the cost of above $42. He is down more than 15% with the position. The stock was traded at above $60 in 2006, and down to single digit in 2009.
No. 5: Cummins Inc. (NYSE:CMI), Weightings: 3.85% - 3,249,400 SharesCummins Inc. is one of the worldwide designers and manufacturers of diesel engines. Cummins Inc. has a market cap of $17.55 billion; its shares were traded at around $88.31 with a P/E ratio of 22.5 and P/S ratio of 1.6. The dividend yield of Cummins Inc. stocks is 1.2%. Cummins Inc. had an annual average earning growth of 30.9% over the past 10 years.
No. 6: Citigroup Inc. (NYSE:C), Weightings: 3.68% - 53,843,400 SharesCitigroup Inc., the global financial services company, has some two hundred million customer accounts and does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Citigroup Inc. has a market cap of $110.11 billion; its shares were traded at around $3.8 with and P/S ratio of 1.3.
Heebner bought into Citigroup in the first quarter of 2010. He tripled the position in the second quarter.
For the complete portfolio holdings of Ken Heebner, go to: http://www.gurufocus.com/holdings.php?GuruName=Ken+Heebner