That is if you put your money into the Fund at the beginning of the 10 years and have never moved in or out. If you do the same as the average investors have done, namely taking money out when the Fund suffered a terrible loss, and putting money in when the Fund had a terrific run, you would have lost 11% annually. That is according to Morningstar, Inc, who calculates this sort of things.
Ken Heebner's CGM Focus in the US is a stark example of investors' tendency to put a manager on a pedestal at the worst conceivable time. Assets flowing into the fund peaked in 2007, following an 80% commodity-fuelled return that year, just in time for the fund to shed half its value in 2008. Not only have most investors not pocketed any of the fund's 18% gain during the past decade, but the typical investor in the fund has lost near 14% per year--a stunning 32-percentage-point investor return/total return gap.
The fund lost more than 48% in 2008 and gained only 10.4% in 2009, lagging behind the S&P 500 by large margins in both years. As we have seen in the cases for quite a few Investment Gurus tracked by us, we tend to give investment managers benefit of doubt when things does not go very well. One shouldn’t judge a investment’s performance based on the performance of one or two years.
One may be curious to ask, after two years of underperformance, how did Heebner prepare his fund for the future?
As of the end of 2009, Ken Heebner owns 68 stocks with a total value of $6.8 billion. In a interview that was aired later last year, he sounded rather bullish, especially on the basic material stocks that could benefit from the economic recovery in China:
Digging into the holding information of his funds, we found he actually talked the walk and walked the talk in there interview. These are his top holdings as of December 31, 2009:
No. 1: Ford Motor Company (F), Weightings: 8.77% - 59,607,000 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 $37.34 billion; its shares were traded at around $11.29 with and P/S ratio of 0.32.
Heebner held Ford Motor Company for more than two years now. The bulk of his shares were purchased in 2Q08 when he beefed up to 78 million shares when the stock prices were much lower. As of 4Q09, he still held 60 million shares. Nice trade on this one!
No. 2: FreeportMcMoRan Copper & Gold Inc. (FCX), Weightings: 7.03% - 5,947,000 Shares
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. FreeportMcMoRan Copper & Gold Inc. has a market cap of $33.18 billion; its shares were traded at around $77.16 with a P/E ratio of 13.37 and P/S ratio of 2.21. The dividend yield of Freeportmcmoran Copper & Gold Inc. stocks is 0.78%. Freeportmcmoran Copper & Gold Inc. had an annual average earning growth of 15.1% over the past 10 years.
This is one of the basic material mining companies that Heebner mentioned in the video. He held the stock since 2003, having been out and in again since then. For the past two years, he held his position relatively steady and as of 4Q09, he had 5.9 million shares.
No. 3: Goldman Sachs Group Inc. (GS), Weightings: 6.9% - 2,777,100 Shares
Goldman Sachs is a global investment banking and securities firm. Goldman Sachs Group Inc. The has a market cap of $80.29 billion; its shares were traded at around $156.18 with a P/E ratio of 7.17 and P/S ratio of 1.55. The dividend yield of Goldman Sachs Group Inc. The stocks is 0.9%. Goldman Sachs Group Inc. had an annual average earning growth of 24.5% over the past 10 years.
Heebner had a small position in 2006, and has since built up to 2.8 million shares since then. He doubled down on the stock in 4Q08 and 1Q09 when the stock fell below $100 per share.
No. 4: Teck Cominco Ltd. (TCK), Weightings: 4.75% - 9,225,000 Shares
Teck Cominco Limited is a mining and mineral development company with major business units focused on copper, metallurgical coal, zinc, gold and energy. Teck Cominco Ltd. has a market cap of $22.2 billion; its shares were traded at around $38.32 with a P/E ratio of 22.15 and P/S ratio of 3.1.
Heebner had a small position since 2Q08 but bought heavily in 4Q09. At the year end, he held 9.2 million shares or $322 million worth of the stock.
No. 5: FedEx Corp. (FDX), Weightings: 4.57% - 3,720,000 Shares
FedEx Corporation is a global transportation and logistics enterprise that offers customers a one-stop source for global shipping, logistics and supply chain solutions. Fedex Corp. has a market cap of $25.58 billion; its shares were traded at around $81.76 with a P/E ratio of 31.09 and P/S ratio of 0.72. The dividend yield of Fedex Corp. stocks is 0.54%. Fedex Corp. had an annual average earning growth of 17.7% over the past 10 years.
Again, this is a long time holding for Heebner, for he had it since 1Q04 when he had a position of 345 thousand shares. He increased his position dramatically from 807 thousand shares in 2Q09 to 4.0 million shares, and sold down slightly to 3.72 million shares in 4Q09.
No. 6: Southern Copper Corp. (SCCO), Weightings: 4.46% - 9,210,000 Shares
Southern Copper Corporation is an integrated copper producer. Southern Copper Corp. has a market cap of $26.36 billion; its shares were traded at around $31.01 with a P/E ratio of 28.19 and P/S ratio of 7.06. The dividend yield of Southern Copper Corp. stocks is 5.55%. Southern Copper Corp. had an annual average earning growth of 46.7% over the past 10 years. GuruFocus rated Southern Copper Corp. the business predictability rank of 2.5-star.
Heebner has been a long time of this stock as well. He bought a position of 865,000 shares in 2Q05. He has been in and out of this stock twice since then. The latest trough was in 2Q09, when he had 950,000 shares. He has since increased to 9.63 million shares in 3Q09 and reduced position slightly in 4Q09 to 9.21 million shares.
Ken Heebner trades in a rather concentrated portfolio. At least with his current top holdings, there have been times when he sold down the positions, often we find him buying back months or years later. Right now, he thinks there is another run for the basic material stocks.
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