Ken Heebner Top Holdings: AAPL Is a Buy at $380

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Jan 11, 2012
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“Obviously, this is one with risk, but the potential is huge.” Ken Heebner is the co-founder of Capital Growth Management, a money management firm with more than $6 billion under management.

Heebner strategy involves growth. He is characterized for being independent and is not at all afraid of making large bets based on his convictions. What he usually does is to invest in companies within areas that have favorable macro trends.

His fund outperformed almost any other fund. As of mid 2011, Capital Growth Management LP owns 83 stocks with a total value of $6.1 billion.

Here are some of his top dividends:, Inc. (PCLN, Financial): Heebner did not add to his PCLN position in the last market correction. PCLN is his top holding, representing 4.3% of the whole portfolio

Priceline is an online travel aggregator that offers booking services for hotel rooms, airline tickets, rental cars, cruises, and other vacation packages. The company operates under the name in the United States, in Europe, and Agoda in Asia, and recently acquired TravelJigsaw to expand its global footprint in car rental.

Priceline had $2.4 billion in cash and short-term investments at the end of September 2011 and about $575 million in senior convertible debt due 2015.

Future forecasts involve reinvestment plans overseas and the firm´s current position brings about sufficient cash flows that enable the company to cancel debts, repurchase shares and finance growth initiatives.

Priceline manages an important portion of hotel bookings and there is still much more space for it to continue growing. PCLN is well positioned to expand. Actually, it has recently added Australia and New Zealand on its business-growth road map.


United Continental Holdings Inc (UAL, Financial): Heebner bought UAL at an average price of $19 a share. He thinks that while the ariline business is a difficult industry, UAL is a good managed business that could profit from an industry that keeps consolidating. UAL represents 3.67% of his portfolio.

UAL is the United States' largest airline. United operates nearly 6,000 daily flights to more than 375 domestic and international destinations from Los Angeles, San Francisco, Denver, Chicago, Houston, New York, and Washington, D.C. The firm generates approximately $34 billion in annual sales.

Financially speaking, UAL has been strong in the last period. The company holds about $8.5 billion in unrestricted cash and short-term investments that it will surely use to meet debt principal payments for the next five years.

In terms of future expectations, United has increased its presence in China. This opportunity is expected to boost revenue growth as the company can charge high fares over international flights. In addition, checked-baggage fees will also bring $1 billion in additional high-margin revenue.

Last but not least, United has launched a new airplane, the Boeing 787 that will certainly increase fuel efficiency and range capabilities. United will begin to focus on new long-haul markets and replace inefficient old aircrafts.


Apple Inc. (AAPL, Financial): New position in Heebner portfolio at an average price of $380

Apple designs consumer electronic devices, including PCs (Mac), tablets (iPad), phones (iPhone), and portable music players (iPod). Furthermore, it has created iTunes, an online store that has become the largest music distributor in the world. In addition, it sells TV shows and movies and applications for the iPhone and iPad. In early 2011, Apple launched the Mac app store, an online store that sells first- and third-party applications for Mac desktop and notebook computers.

The company has $26 billion in cash and short-term investments, holds another $56 billion in long-term investments, and generated more than $33 billion in free cash flow during fiscal 2011. It carries no debt.

Apple's expertise in software and content allows the link between generations.

As we can see from the FAST Graph below, AAPL shares appear severely undervalued considering what the earnings are and the normal P/E ratio that the stock should have. I think AAPL shares could approach the $500 level in 2012.


Tiffany & Co. (TIF): Heebner increased his position in TIF last quarter. This position represents 3.21% of his portfolio.

Tiffany is an international jeweler and specialty retailer. It designs and sells fine jewelry in addition to fine china, fashion accessories, timepieces, fragrances, and gift items through more than 240 retail stores in the United States and abroad.

It also sells by website and through its catalog.

Tiffany brand is always recognized by the tiny blue box that commands price premium. In addition, Tiffany has strong control of its supply chain.

Tiffany generally buys between 40 and 70% of the diamonds used to manufacture jewelry.

Finally, the company is engaged with the top diamond providers and even has direct contracts with mines. In terms of future expectations, Tiffany´s presence in China, represents a large growth opportunity over the long run.

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