Wednesday, May 28, 2008

Ken Heebner

Absolutely fascinating article about Ken Heebner. From reading through this his thematic style seems similar to how I think. Thanks goes to Pete.

http://cnnmoney.printthis.clickability.com/pt/cpt?action=cpt&title=America%27s+hottest+investor%3A+mutual+fund+manager+Ken+Heebner+-+May.+27%2C+2008&expire=-1&urlID=28755312&fb=Y&url=http%3A%2F%2Fmoney.cnn.com%2F2008%2F05%2F23%2Fmagazines%2Ffortune%2Fbirger_americas_hottest_investor.fortune%2Findex.htm&partnerID=2200

Since May 1998, Focus has an average annualized return of 24%, the best ten-year record of any U.S. mutual fund, compared with only 4% for Standard & Poor's 500.

and

He works long hours trying to identify emerging trends in the economy. When he finds a promising one, he'll go all in, making huge bets on the stocks poised to benefit. Asked how long it takes him to identify those stocks, Heebner answers, "About ten minutes. I've been at this a long time."

and

CGM is pretty much a one-man show. Heebner's entire investment team consists of two traders - Elise Schaefer and Sue Small - and Columb, the U2 fan. Being an analyst for Heebner is a bit like being a beauty consultant for Halle Berry, so Columb knows better than to try to suggest stocks. She operates more like a sleuth. Heebner will ask her to dig up the latest information on, say, scrap steel prices in China or deep-sea oil rig leases, and within an hour or two her findings are on his desk.

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Heebner thinks steel prices could double and oil could blow past $200 a barrel. (He also thinks inflation will hit double digits within the next five years: "I don't know why anyone would buy a bond.") Yet he is constantly on the lookout for any sign that the economic slowdown in the U.S. may be infecting emerging economies abroad. That would deep-six his whole investment thesis, which hinges on China and other emerging nations using more energy and building more infrastructure. "I'm not waiting for Morgan Stanley to tell me there's something wrong in China," Heebner says. "By then it's too late."

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Heebner enjoys his job enormously, which is the key to his longevity. "It's not a business for him, it's a pleasure," says his brother Jeffrey, 70, who ran a home-security business before retiring

and

Jeff Heebner says that his brother has always been a little obsessed with making a buck - even though spending it has never been his thing.

and

After getting his MBA, Heebner wanted to go to work on Wall Street as an investment banker. Nobody would hire him.

5 comments:

Justin said...

Yeah, I read that yesterday. Very very interesting. Talk about picking the trends at the right time.

What was interesting is how he picks a trend and then goes in big - no half-measures. That must take some guts, to absolutely back your judgement like that.

However, in reading the article I couldn't help feeling that he was only one wrong hunch (I know he works on more than a hunch, but still..) away from losing a lot of money.

Perhaps I'm just getting too old and conservative for that kind of investing!

Mikey said...

What is his beta like?

Market Seer said...

Justin - agree with you it seems that he is one bad decision from losing alot of money. My guess is he hedges in some form or fashion. My other guess is if he is wrong he is so early he wouldn't get hurt that bad. What I mean by that when it says he was buying Potash and Monsanto the stocks hadn't moved all that much. So if your wrong you hold them for a year and they go down 20% and then up 20% and you exit and probably lose a little or make a little. Buying them now you stand to lose a whole lot more if your wrong then the price they had been for almost 10 years.

Market Seer said...

Mikey - I don't look at beta at all. In my personal opinion it is one of the most worthless measures in all of finance. A stock drops 50% and the Beta goes up and somehow the stock is more risky than it was the day before? You are buying the same assets at a 50% discount. It may be more risky because of the reason it went down (loss of a lawsuit, patent issues, failed drug etc.) but not because the Beta went up. All things equal it is much less risky.

Considering how well he has done in the past year and how contrary some of his bets are I wouldn't be surprised over the short term if his Beta is actually negative. Longer term his beta is probably higher.

Justin said...

Good point Kaspar. Being early to the party doesn't carry the same risks as being late.