What can we learn from Ken Heebner, the Investment Guru of 2007? Over the past 10 years his fund has averaged more than 25% a year, while the S&P500 just delivered 4%. With this article we like to review Ken Heebner’s investment strategy and his latest investment trend.
The success of Ken Heebner is attributed to these key areas in his investment decision making:
1. Staying ahead of trend, looking for an investable advantage
2. Independent thinking and no afraid of going against the herd.
3. Making big bets on companies and sectors where he had the strongest conviction, pulling the plug quickly when conditions change
4. Does not fell in love with his winners, sell when they are overvalued.
His fund does have high turnovers. “Pulling the plug quickly when conditions change” make it difficult for other to follow. But if an investor observes Heebner’s moves, at least one can avoid some of the areas that have trouble coming.
So what is Ken Heebner thinking now?
We can see some of his thoughts from the recent shareholder letter of CGM funds, written by CGM Fund president Robert Kemp. These are the quotes:
“We believe the worst of the current financial ordeal is behind us though it is still too early to expect a broad recovery in the economy. Fortunately, we believe there are bright spots in the economy, areas of strength to provide select investment opportunities in an otherwise difficult market.”
“On June 30, 2008, CGM Focus Fund held significant long positions in the oil service, steel and independent oil production industries. The Fund’s three largest long holdings were Weatherford International Ltd. (oil service), Schlumberger Limited (oil service) and United States Steel Corporation. The Fund was also approximately 14% (percentage of total net assets) invested in stocks sold short at the end of the second quarter. The largest short positions were in Wachovia Corporation (WB) (financial services) and Washington Mutual, Inc. (WM) (financial services).”
This is the sector weightings of his portfolio at the end of second quarter. Apparently Ken Heebner was still bullish on oil and commodities, bearish on financials. His holding of 37% of energy stocks is almost doubled from the previous quarter.
Since the end of the second quarter, oil prices and oil stocks have all pulled back from their highs. Many of them are even at 52-week lows. If you want to follow Ken Heebner, this can well be a good opportunity, unless … he has pulled the plug.
These are some of the largest energy holding of Ken Heebner’s portfolio.
Petroleo Brasileiro S.A.Petrobras (PBR)
Petroleo Brasileiro S.A.Petrobras is an integrated company operating in exploration production refining retailing and transportation of petroleum and its byproducts at Brazil and abroad. Petroleo Brasileiro S.A.Petrobras has a market cap of $232.78 billion; its shares were traded at around $53.06 with a P/E ratio of 18.07 and P/S ratio of 1.99.
Ken Heebner owns 10,060,700 shares as of 06/30/2008, an increase of 11.53% from the previous quarter. This position accounts for 4.92% of the $14.5 billion portfolio of CGM. PBR is owned by 7 Gurus. George Soros also bought 11,456,800 shares in the quarter that ended on 06/30/2008, which is 32.79% of the $2.47 billion portfolio of Soros Fund Management LLC.
Schlumberger (SLB)
Schlumberger Limited is a global technology services company consisting of two business segments Schlumberger Oilfield Services and SchlumbergerSema. Schlumberger Oilfield Services is the leading provider of exploration and production services solutions and technology to the international petroleum industry. SchlumbergerSema is a leading information technology services company providing a unique combination of domain expertise and global capabilities delivered on a local basis. Schlumberger Ltd. has a market cap of $115.98 billion; its shares were traded at around $96.68 with a P/E ratio of 21.66 and P/S ratio of 4.69.
Ken Heebner owns 6,579,200 shares as of 06/30/2008, an increase of 27.9% from the previous quarter. This position accounts for 4.88% of his total portfolio. Interestingly, George Soros also initiated positions in Schlumberger. He bought 109,000 shares in the quarter that ended on 06/30/2008, which is 0.47% of the $2.47 billion portfolio of Soros Fund Management LLC.
Freeport-McMoRan (FCX)
Freeport-McMoRan is engaged in mineral exploration and development mining and milling of copper gold and silver in Indonesia and the smelting and refining of copper concentrates in Spain and Indonesia. They are the world's lowest-cost copper producer and one of the world's largest producers of copper and gold. FCX's operations are conducted through its subsidiaries P.T. Freeport Indonesia (PT-FI) P.T. IRJA Eastern Minerals Corporation (Eastern Mining) and through Atlantic Copper S.A. ( Atlantic). FreeportMcMoRan Copper & Gold Inc. has a market cap of $34.8 billion; its shares were traded at around $90.63 with a P/E ratio of 11.57 and P/S ratio of 1.72. The dividend yield of FreeportMcMoRan Copper & Gold Inc. stocks is 1.9%.
Ken Heebner owns 5,853,700 shares as of 06/30/2008, an increase of 22.5% from the previous quarter. This position accounts for 4.73% of his portfolio. Coincidently, George Soros owns 137,850 shares as of 06/30/2008, an increase of 1608.6% from the previous quarter. This position accounts for 0.65% of the $2.47 billion portfolio of Soros Fund Management LLC.
Peabody Energy (BTU)
Peabody Energy is the largest private-sector coal company in the world. They offer a broad portfolio of coal supplies including coal produced from operations that Peabody Energy manages or owns majority interests in along with brokered coal secured by Peabody Coaltrade. Peabody Energy Corp. has a market cap of $17.7 billion; its shares were traded at around $65.07 with a P/E ratio of 49.18 and P/S ratio of 3.41.
Ken Heebner bought 7,690,000 shares in the quarter that ended on 06/30/2008, which is 4.67% of his portfolio. John Keeley also owns 21,710 shares as of 06/30/2008, an increase of 13.07% from the previous quarter. This position accounts for 0.02% of the $10.95 billion portfolio of Keeley Fund Management.
CONSOL Energy Inc. (CNX)
CONSOL Energy Inc. is the largest producer of high-Btu bituminous coal in the United States and the largest exporter of U.S. coal. CONSOL Energy Inc. has a market cap of $12.5 billion; its shares were traded at around $68.21 with a P/E ratio of 70.90 and P/S ratio of 3.29. The dividend yield of CONSOL Energy Inc. stocks is 0.6%.
Ken Heebner bought 5,880,000 shares in the quarter that ended on 06/30/2008, which is 4.56% of his portfolio. George Soros also bought 158,000 shares in the quarter that ended on 06/30/2008, which is 0.72% of the $2.47 billion portfolio of Soros Fund Management LLC.
For the complete portfolio of Ken Heebner, go to HERE
The success of Ken Heebner is attributed to these key areas in his investment decision making:
1. Staying ahead of trend, looking for an investable advantage
2. Independent thinking and no afraid of going against the herd.
3. Making big bets on companies and sectors where he had the strongest conviction, pulling the plug quickly when conditions change
4. Does not fell in love with his winners, sell when they are overvalued.
His fund does have high turnovers. “Pulling the plug quickly when conditions change” make it difficult for other to follow. But if an investor observes Heebner’s moves, at least one can avoid some of the areas that have trouble coming.
So what is Ken Heebner thinking now?
We can see some of his thoughts from the recent shareholder letter of CGM funds, written by CGM Fund president Robert Kemp. These are the quotes:
“We believe the worst of the current financial ordeal is behind us though it is still too early to expect a broad recovery in the economy. Fortunately, we believe there are bright spots in the economy, areas of strength to provide select investment opportunities in an otherwise difficult market.”
“On June 30, 2008, CGM Focus Fund held significant long positions in the oil service, steel and independent oil production industries. The Fund’s three largest long holdings were Weatherford International Ltd. (oil service), Schlumberger Limited (oil service) and United States Steel Corporation. The Fund was also approximately 14% (percentage of total net assets) invested in stocks sold short at the end of the second quarter. The largest short positions were in Wachovia Corporation (WB) (financial services) and Washington Mutual, Inc. (WM) (financial services).”
This is the sector weightings of his portfolio at the end of second quarter. Apparently Ken Heebner was still bullish on oil and commodities, bearish on financials. His holding of 37% of energy stocks is almost doubled from the previous quarter.
| Technology |  0.8% |
| Financials | 12.3% |
| Telecom | 0% |
| Consumer Services | 0.6% |
| Health Care | 0% |
| Consumer Goods | 3.4% |
| Industrials | 6.4% |
| Basic Materials | 35.3% |
| Oil & Gas | 37.6% |
Since the end of the second quarter, oil prices and oil stocks have all pulled back from their highs. Many of them are even at 52-week lows. If you want to follow Ken Heebner, this can well be a good opportunity, unless … he has pulled the plug.
These are some of the largest energy holding of Ken Heebner’s portfolio.
Petroleo Brasileiro S.A.Petrobras (PBR)
Petroleo Brasileiro S.A.Petrobras is an integrated company operating in exploration production refining retailing and transportation of petroleum and its byproducts at Brazil and abroad. Petroleo Brasileiro S.A.Petrobras has a market cap of $232.78 billion; its shares were traded at around $53.06 with a P/E ratio of 18.07 and P/S ratio of 1.99.
Ken Heebner owns 10,060,700 shares as of 06/30/2008, an increase of 11.53% from the previous quarter. This position accounts for 4.92% of the $14.5 billion portfolio of CGM. PBR is owned by 7 Gurus. George Soros also bought 11,456,800 shares in the quarter that ended on 06/30/2008, which is 32.79% of the $2.47 billion portfolio of Soros Fund Management LLC.
Schlumberger (SLB)
Schlumberger Limited is a global technology services company consisting of two business segments Schlumberger Oilfield Services and SchlumbergerSema. Schlumberger Oilfield Services is the leading provider of exploration and production services solutions and technology to the international petroleum industry. SchlumbergerSema is a leading information technology services company providing a unique combination of domain expertise and global capabilities delivered on a local basis. Schlumberger Ltd. has a market cap of $115.98 billion; its shares were traded at around $96.68 with a P/E ratio of 21.66 and P/S ratio of 4.69.
Ken Heebner owns 6,579,200 shares as of 06/30/2008, an increase of 27.9% from the previous quarter. This position accounts for 4.88% of his total portfolio. Interestingly, George Soros also initiated positions in Schlumberger. He bought 109,000 shares in the quarter that ended on 06/30/2008, which is 0.47% of the $2.47 billion portfolio of Soros Fund Management LLC.
Freeport-McMoRan (FCX)
Freeport-McMoRan is engaged in mineral exploration and development mining and milling of copper gold and silver in Indonesia and the smelting and refining of copper concentrates in Spain and Indonesia. They are the world's lowest-cost copper producer and one of the world's largest producers of copper and gold. FCX's operations are conducted through its subsidiaries P.T. Freeport Indonesia (PT-FI) P.T. IRJA Eastern Minerals Corporation (Eastern Mining) and through Atlantic Copper S.A. ( Atlantic). FreeportMcMoRan Copper & Gold Inc. has a market cap of $34.8 billion; its shares were traded at around $90.63 with a P/E ratio of 11.57 and P/S ratio of 1.72. The dividend yield of FreeportMcMoRan Copper & Gold Inc. stocks is 1.9%.
Ken Heebner owns 5,853,700 shares as of 06/30/2008, an increase of 22.5% from the previous quarter. This position accounts for 4.73% of his portfolio. Coincidently, George Soros owns 137,850 shares as of 06/30/2008, an increase of 1608.6% from the previous quarter. This position accounts for 0.65% of the $2.47 billion portfolio of Soros Fund Management LLC.
Peabody Energy (BTU)
Peabody Energy is the largest private-sector coal company in the world. They offer a broad portfolio of coal supplies including coal produced from operations that Peabody Energy manages or owns majority interests in along with brokered coal secured by Peabody Coaltrade. Peabody Energy Corp. has a market cap of $17.7 billion; its shares were traded at around $65.07 with a P/E ratio of 49.18 and P/S ratio of 3.41.
Ken Heebner bought 7,690,000 shares in the quarter that ended on 06/30/2008, which is 4.67% of his portfolio. John Keeley also owns 21,710 shares as of 06/30/2008, an increase of 13.07% from the previous quarter. This position accounts for 0.02% of the $10.95 billion portfolio of Keeley Fund Management.
CONSOL Energy Inc. (CNX)
CONSOL Energy Inc. is the largest producer of high-Btu bituminous coal in the United States and the largest exporter of U.S. coal. CONSOL Energy Inc. has a market cap of $12.5 billion; its shares were traded at around $68.21 with a P/E ratio of 70.90 and P/S ratio of 3.29. The dividend yield of CONSOL Energy Inc. stocks is 0.6%.
Ken Heebner bought 5,880,000 shares in the quarter that ended on 06/30/2008, which is 4.56% of his portfolio. George Soros also bought 158,000 shares in the quarter that ended on 06/30/2008, which is 0.72% of the $2.47 billion portfolio of Soros Fund Management LLC.
For the complete portfolio of Ken Heebner, go to HERE
