So, Ken Heebner hasn't been getting the best of returns of late. In fact, as this article points out, he's been getting rather bad returns--and for a while.
Nevertheless, as these three quotes show, Heebner hasn't changed his general strategy:
1. "“Most people think this is the worst time in the world to be optimistic, but my portfolio is positioned for strength in the U.S. . . I am functioning in a contrarian mode.”
2. "[Negative sentiment] historically has been associated with maximum points of opportunity for investing."
3. "I am completely outside the mainstream. I see the mainstream in the distance."
Will Heebner's fund come back yet again? Or is an investment in the banks ultimately a doomed strategy?
My own view is that if anyone can pull off a successful investment in them from here that man is Heebner--but even so I wouldn't want to join him in the bet.
Showing posts with label ken heebner. Show all posts
Showing posts with label ken heebner. Show all posts
Tuesday, July 17, 2012
Wednesday, February 29, 2012
What's Ken Heebner Investing in Now?
Seeking Alpha has a post going over some of Heebner's current top picks. Worth checking out, even if (like me) you think investing in financials like Citigroup is madness.
Tuesday, May 12, 2009
Brokers Like Heebner
For those familiar with Ken Heebner's investment style--which includes big (and frequent) movements in and out of sectors--the title of this post may not come as too much of a surprise.
But just how much do brokers such as Citigroup and Merrilly Lynch like Heebner? That's impossible to tell. However, according to a recent report by Bloomberg, Heebner gave the brokers 71 million reasons to like him. And they could count all those reasons in dollars.
The huge commissions paid to brokers was, of course, partly due to his trading style and partly due to the need to meet redemptions (discussed here).
In any case, those are big numbers, and they definitely put a drag on performance. It's a good thing Heebner's brain travels at the speed of light.
But just how much do brokers such as Citigroup and Merrilly Lynch like Heebner? That's impossible to tell. However, according to a recent report by Bloomberg, Heebner gave the brokers 71 million reasons to like him. And they could count all those reasons in dollars.
The huge commissions paid to brokers was, of course, partly due to his trading style and partly due to the need to meet redemptions (discussed here).
In any case, those are big numbers, and they definitely put a drag on performance. It's a good thing Heebner's brain travels at the speed of light.
Wednesday, April 29, 2009
Heebner: CGM Focus Redemptions
Holders of CGM Focus, the fund run by legendary investor Ken Heebner, seemed to have one question on their mind in the first quarter of 2009: "What have you done for me lately?"
The answer, as they saw it, was not much. And thus, according to this Bloomberg report, CGM Focus had the most withdrawals of any other fund, $219.2 million in fact.
That sum added up to 5.3 percent of the fund's yearend assets. Not a tiny number to deal with.
Still, according to Morningstar, "the $3.24 billion CGM Focus remains the best-performing diversified U.S. stock fund in the 10 years ended March 31, with an average annual return of 16.7 percent."
Mutual fund investors in CGM got their redemptions. The question to ask now is whether Heebner will redeem himself (not from a bad long term record but from a bad short term assessment by investors).
The answer, as they saw it, was not much. And thus, according to this Bloomberg report, CGM Focus had the most withdrawals of any other fund, $219.2 million in fact.
That sum added up to 5.3 percent of the fund's yearend assets. Not a tiny number to deal with.
Still, according to Morningstar, "the $3.24 billion CGM Focus remains the best-performing diversified U.S. stock fund in the 10 years ended March 31, with an average annual return of 16.7 percent."
Mutual fund investors in CGM got their redemptions. The question to ask now is whether Heebner will redeem himself (not from a bad long term record but from a bad short term assessment by investors).
Wednesday, April 8, 2009
Ken Heebner's Macro View
This article on Ken Heebner in SeekingAlpha is short and doesn't say much, but it does have some decently cool graphs.
What's more, the article agrees with something I wrote a lot about before, mainly how this great investor achieves his (usually correct) mountain-top perspective:
Coming to a macro viewpoint in investing is after all really no different than coming to the same in engineering or politics or medicine. If reached after applying logic to an exhaustive look at all the relevant facts, the conclusion reached is actionable.
One can of course be wrong, especially in the short term, as new circumstances arise, the relevancy of data used change, or whatever, but the only way to rise above the error is to apply the same method: applying logic to the new relevant data and reaching a conclusion based on it.
What's more, the article agrees with something I wrote a lot about before, mainly how this great investor achieves his (usually correct) mountain-top perspective:
Ken Heebner has a bottom-up driven investment process, but takes big macro bets as a result of his bottom-up analysis.Despite recent bad returns, I continue to think that this is a valid approach to investing (as well as all areas of knowledge).
Coming to a macro viewpoint in investing is after all really no different than coming to the same in engineering or politics or medicine. If reached after applying logic to an exhaustive look at all the relevant facts, the conclusion reached is actionable.
One can of course be wrong, especially in the short term, as new circumstances arise, the relevancy of data used change, or whatever, but the only way to rise above the error is to apply the same method: applying logic to the new relevant data and reaching a conclusion based on it.
Tuesday, March 24, 2009
Buffett (Not) Related to Recent Fraud
Though not before significant (and possibly total) losses to some investors. the SEC just reported that it caught a fraud early--something its workers should take great pride in.
The story, in short, is that a supposed international real estate firm claimed Buffett as an honorary chairman and Credit Suisse as a significant investor. These two names were enough for many people to invest substantial amounts of money with the company.
As one of the victims stated, "My analysis was that if IRH was good enough for an investment and endorsement by Warren Buffet[t] it was good enough for me."
The one hundred grand that this guy invested, along with hundreds of thousands of dollars of other victims, was wired to the Philippines--and the US government is hoping to get it back. The full story, including a statement by Buffett about his non-relation to the firm, is here.
Why mention it at The Guru Five? While wrong, I found the thinking behind the victim very interesting, because what he stated is remarkably similar to the process of many investors in choosing stocks owned by Berkshire or other investors.
You may have heard something like this before: "If Burlington Northern is good enough of an investment for Warren Buffett, it is good enough for me."
Now, investors can know with a great deal more certainty whether Buffett is actually invested in BNI, or Heebner in Morgan Stanley, and so on, but there are still serious problems with this type of reasoning.
The biggest problem results from the fact that the above investor "drops the context"--meaning he ignores the reality that the ongoing cash flow stream, other portfolio companies (which may or may not serve as hedges that offset a weakness in the business), and knowledge are going to be different in each case.
What is proper for one investor to hold, may not always be proper for another to hold.
Perhaps there are safer investments, with more upside, for the investor managing a smaller sum of money. Perhaps the super-investor is hedged via instruments or positions that aren't required to be reported. And perhaps the investment that another great investor picked isn't as safe for a person who knows nothing about it (and will act vastly different in light of new data, usually with horrible results).
In life, as in investing, thinking independently is a good thing. And, as the returns of some of the investors profiled here show, it is a virtue that (over the long term) is usually rewarded handsomely.
The story, in short, is that a supposed international real estate firm claimed Buffett as an honorary chairman and Credit Suisse as a significant investor. These two names were enough for many people to invest substantial amounts of money with the company.
As one of the victims stated, "My analysis was that if IRH was good enough for an investment and endorsement by Warren Buffet[t] it was good enough for me."
The one hundred grand that this guy invested, along with hundreds of thousands of dollars of other victims, was wired to the Philippines--and the US government is hoping to get it back. The full story, including a statement by Buffett about his non-relation to the firm, is here.
Why mention it at The Guru Five? While wrong, I found the thinking behind the victim very interesting, because what he stated is remarkably similar to the process of many investors in choosing stocks owned by Berkshire or other investors.
You may have heard something like this before: "If Burlington Northern is good enough of an investment for Warren Buffett, it is good enough for me."
Now, investors can know with a great deal more certainty whether Buffett is actually invested in BNI, or Heebner in Morgan Stanley, and so on, but there are still serious problems with this type of reasoning.
The biggest problem results from the fact that the above investor "drops the context"--meaning he ignores the reality that the ongoing cash flow stream, other portfolio companies (which may or may not serve as hedges that offset a weakness in the business), and knowledge are going to be different in each case.
What is proper for one investor to hold, may not always be proper for another to hold.
Perhaps there are safer investments, with more upside, for the investor managing a smaller sum of money. Perhaps the super-investor is hedged via instruments or positions that aren't required to be reported. And perhaps the investment that another great investor picked isn't as safe for a person who knows nothing about it (and will act vastly different in light of new data, usually with horrible results).
In life, as in investing, thinking independently is a good thing. And, as the returns of some of the investors profiled here show, it is a virtue that (over the long term) is usually rewarded handsomely.
Friday, March 20, 2009
Guru Focus Review
While The Guru 5 primarily looks at the actions and thoughts of--you guessed it--only five of the best investors, GuruFocus is a good site with a much larger scope.
They have some useful data on portfolio positions, show how much money of an invested portfolio is in a given industry, and a decent news feed. They also just added portfolio performance charts, which allow you to see what Warren Buffett or Ken Heebner or Bill Miller has done for investors lately. (For a good example, showing Berkshire's performance relative to the market, click here.)
One of the things that GuruFocus does well is show the activity of a lot of different managers with regards to a single stock (over a set amount of time). And, on the same screen, it will show whether insiders were selling or buying, or both, and in what numbers. This is good stuff--great stuff actually. So, if you have a single stock you're interested in, this is one of the best places to get a broad view of what others are thinking and doing with regards to it.
However, the growing lack of focus at the site can be as much a vice as it is a virtue. It really depends on what you are looking for, and how much time you have. I noted above that the news feed was just "decent" above, for example, because I really don't care about many of the articles linked to (written on lesser investors) and I definitely don't care to read some of the articles posted there (written by lesser investors).
The same that can be said about the news and articles feed, can be said about the site's forum. Some good discussions can be found there and a bunch of worthless one's as well (relative to what could be read elsewhere). I don't have the time to wade through the bad, or argue with it, in order to reach the good.
And, while I don't think it's necessarily wrong to do that, given other options I would not recommend it--especially for new investors. Far better to read everything the greats wrote, or good books on them, then start reading the letters of lesser investors, and so on down the chain.
Summary:
GuruFocus is a great site, but because of the volume of managers and information, one should clearly define one's purpose in going to it, rather than mindlessly click around. If you do this latter, you will likely waste a lot of time and not learn a tenth as much as if you read a book or a handful of shareholder letters.
If, however, you use the site for getting a quick view of what managers are doing in general or with regards to a specific company you're focusing on, I think you'll find it very valuable. From there, you can judge for yourself the value of each passing news item or article.
Note: the site's forum contains a steady stream of articles cut and pasted from other writers or sites. That's a copyright infringement issue for the owners of that data or of the site itself to end, but I mention it here simply to say I was not referring to it above--when mentioning the good parts of the forum.
They have some useful data on portfolio positions, show how much money of an invested portfolio is in a given industry, and a decent news feed. They also just added portfolio performance charts, which allow you to see what Warren Buffett or Ken Heebner or Bill Miller has done for investors lately. (For a good example, showing Berkshire's performance relative to the market, click here.)
One of the things that GuruFocus does well is show the activity of a lot of different managers with regards to a single stock (over a set amount of time). And, on the same screen, it will show whether insiders were selling or buying, or both, and in what numbers. This is good stuff--great stuff actually. So, if you have a single stock you're interested in, this is one of the best places to get a broad view of what others are thinking and doing with regards to it.
However, the growing lack of focus at the site can be as much a vice as it is a virtue. It really depends on what you are looking for, and how much time you have. I noted above that the news feed was just "decent" above, for example, because I really don't care about many of the articles linked to (written on lesser investors) and I definitely don't care to read some of the articles posted there (written by lesser investors).
The same that can be said about the news and articles feed, can be said about the site's forum. Some good discussions can be found there and a bunch of worthless one's as well (relative to what could be read elsewhere). I don't have the time to wade through the bad, or argue with it, in order to reach the good.
And, while I don't think it's necessarily wrong to do that, given other options I would not recommend it--especially for new investors. Far better to read everything the greats wrote, or good books on them, then start reading the letters of lesser investors, and so on down the chain.
Summary:
GuruFocus is a great site, but because of the volume of managers and information, one should clearly define one's purpose in going to it, rather than mindlessly click around. If you do this latter, you will likely waste a lot of time and not learn a tenth as much as if you read a book or a handful of shareholder letters.
If, however, you use the site for getting a quick view of what managers are doing in general or with regards to a specific company you're focusing on, I think you'll find it very valuable. From there, you can judge for yourself the value of each passing news item or article.
Note: the site's forum contains a steady stream of articles cut and pasted from other writers or sites. That's a copyright infringement issue for the owners of that data or of the site itself to end, but I mention it here simply to say I was not referring to it above--when mentioning the good parts of the forum.
Wednesday, March 11, 2009
The Ken Heebner Way
Given that he's one of the investors followed here, The Guru 5's respect for Ken Heebner should be obvious. It's not short-lived. Almost a year ago, we made a post on GuruFocus that looked at Heebner's methodology (which is far more important than knowing what he's invested in right now). A cut and paste of it follows, with more to come later.
Given that Heebner was the value investor of the year [2007]--and has an exceptional, multi-decade track record--it's a shame that we only got started talking about his method of investing due to a post which (to put it nicely) attempted to forecast the manager's future returns by looking at factors which are probably not the most important to focus on. In that thread, I wrote the following:
Later on in that thread, someone--I think DaveinHackensack--mentioned that Heebner's call on steel prices was due to him in part reading the China Metals Weekly. I can add to this since I remember an article years ago when Heebner became bullish on copper. The reason was partly supply and demand of course, but he noted that he became so bullish after talking with many people on the phone in Chile (the equivalent of Ghawar for copper) and noting that they had a real water problem down there which is only getting worse.
These sort of macro calls, from the ground up, are again more correct than not because they're made from the ground up, and with many of years of experience--which allows him to know what is relevant and what is not.
Buffett's circle of competence applies in every area one wants to invest. The calls should be differentiated from the person who looks at a past chart for a commodity (even one's that precede 1980!), or starts with an assumption about global growth and comes up with or deduces a conclusion from that. There's a very big difference in thinking, and as Heebner has shown, in results....
Given that Heebner was the value investor of the year [2007]--and has an exceptional, multi-decade track record--it's a shame that we only got started talking about his method of investing due to a post which (to put it nicely) attempted to forecast the manager's future returns by looking at factors which are probably not the most important to focus on. In that thread, I wrote the following:
I highlighted the word inductive because I think this is the key to Heebner's many brilliant calls--which many would refer to as top-down. In all actuality, though, I think we can say that his calls were proven correct so many times because they were made from the ground up, using a host of different, though very relevant facts.With regards to Heebner, I think it's important to point out that he gets a view of the "big picture" from the bottom up, just as fundamental investors do about any big company.
His macro call on oil was a result of years of work talking with people in the field, looking at supply and demand--and not just on a removed basis (using statistics from sources that include various assumptions). He studied Ghawar, was talking with the experts on it, and so on.I think Heebner's method of getting to the big picture is especially important for anyone wanting to improve. There's a false dichotomy in many people's minds now that you have to be bottoms up or top down. Some will argue that it pays to be both, but very few point out that any "big picture" analysis of value uses the same inductive method as is used by the greats in individual companies.
Heebner has made excellent macro calls because he approaches such questions with the same rigourous logic and voracious fact-gathering that he brings to the analysis of individual companies. He has excellent returns because his method and his work ethic are so good.
Later on in that thread, someone--I think DaveinHackensack--mentioned that Heebner's call on steel prices was due to him in part reading the China Metals Weekly. I can add to this since I remember an article years ago when Heebner became bullish on copper. The reason was partly supply and demand of course, but he noted that he became so bullish after talking with many people on the phone in Chile (the equivalent of Ghawar for copper) and noting that they had a real water problem down there which is only getting worse.
These sort of macro calls, from the ground up, are again more correct than not because they're made from the ground up, and with many of years of experience--which allows him to know what is relevant and what is not.
Buffett's circle of competence applies in every area one wants to invest. The calls should be differentiated from the person who looks at a past chart for a commodity (even one's that precede 1980!), or starts with an assumption about global growth and comes up with or deduces a conclusion from that. There's a very big difference in thinking, and as Heebner has shown, in results....
Thursday, February 19, 2009
Heebner's Recent Moves
An interesting article is up at Forex Hound on Ken Heebner's recent moves. An excerpt:
If you have been following the market with even [one] eye you can see that move was again in error, but one positive thing about Heebner is if he changes his mind he will go whole turkey. So in the latest report those 3 positions are now GONE. Now his focus seems to be insurers, which have struggled since Jan 1 - but in theory if the government treats them as banks and takes some of their bad assets out and onto the tax payers shoulders; then you "win" ...Enjoy the rest of the article at Forex Hound or, where it appeared first, at Trader Mark's site.
[Lists the biggest additions in Quarter 4]
If we assume he kept these for the past 6 weeks, Newmont Mining has an excellent run (in lockstep with gold), Research in Motion had an excellent run until a week ago when it updated its guidance and the stock has been in freefall since (it will be interesting to see if he hung on), healthcare has been one of the better places to hide, and adult education has been one of the "thesis" areas in the market. The rest is insurance, insurance, insurance.
Wednesday, February 11, 2009
Heebner on Margin Calls
A recent article in Kiplinger's noted that Buffett is buying then asked why other fund managers aren't following suit. The answer was instructive:
Many fund managers likely agree with Buffett's sentiments. And at today's prices, they wish they could be like Buffett and buy stocks. However, due to a panicked investing populace, that's simply not possible.
You see, when individual investors elect to withdraw their money from a mutual fund, the fund manager must quickly come up with the cash to redeem those investors. In 2008, equity investors withdrew over $215 billion from mutual funds, spurring a wave of selling by fund managers--even though those managers likely still believed in the prospects of the stocks they were selling!
As Morningstar Director of Equity Research Pat Dorsey explained in a recent video, these stock sales had "nothing to do with fundamentals, nothing to do with the underpinnings of our economy ... no matter what the stocks are, no matter how attractive those assets may be, [fund managers] have to sell them because they need to raise the cash to send those checks out" to their investors.
And that $215 billion doesn't even include hedge fund managers who are forced to sell stocks because of investor redemptions and margin calls!
As master money manager Ken Heebner--skipper of the CGM Focus fund--told USA TODAY, "The reason for the sharp decline is massive selling from hedge funds, not because they want to, but because they have to reduce their leverage ... it's the biggest margin call since 1929."
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