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Ken Heebner was one of the most popular hedge fund managers, with tremendous returns until the 2008-2009 crash. He managed to beat the S&P 500 index by 63 percentage points in 2000. In 2001, he returned 47% vs. S&P 500’s 12% decline. He beat the market marginally in 2002 and 2004 marginally. In 2003, he returned 67% and beat the S&P 500 by nearly 38 percentage points. In 2005 Heebner again beat the market by 20 percentage points. Even though he underperformed in 2006 marginally, he killed the S&P 500 by returning 80% in 2007.

These were amazing returns. Unfortunately he lost a lot of credibility in 2008 and 2009 when he returned -48% and 10.5% respectively. His 2010 performance isn’t enough to recover his 2008 losses. His portfolio gained only 16% in 2010. We like Ken Heebner because he isn’t afraid of betting against the market when most fund managers are secret index huggers.

At the end of December, Ken Heebner was most bullish about the following stocks and he had at least $75 Million in each name:

FORD MTR CO DEL

F

-7.9%

698476

FREEPORT-MCMORAN

FCX

-7.6%

429622

TECK RESOURCES LTD

TCK

-12.3%

335984

SCHLUMBERGER LTD

SLB

7.8%

279692

WALTER INDS INC

WLT

8.1%

250566

BORGWARNER INC

BWA

6.7%

243491

TATA MTRS LTD

TTM

-6.5%

242789

PRICELINE COM INC

PCLN

36.9%

220671

MAGNA INTL INC

MGA

-0.9%

219232

HALLIBURTON CO

HAL

23.9%

215468

SANDISK CORP

SNDK

-1.1%

169115

AUTOLIV INC

ALV

2.0%

168142

NATIONAL OILWELL VARCO

NOV

14.2%

165435

COACH INC

COH

8.4%

163718

POTASH CORP SASK INC

POT

9.4%

137799

ALPHA NATURAL RES

ANR

-3.1%

121261

HOST HOTELS & RESORTS

HST

-0.3%

109373

SIMON PPTY GROUP

SPG

16.0%

108014

CB RICHARD ELLIS GROUP IN

CBG

30.4%

98918

SL GREEN RLTY CORP

SLG

22.4%

97890

DIAMONDROCK HOSPITALITY

DRH

1.1%

93456

EQUITY RESIDENTIAL

EQR

15.7%

82601

CTRIP COM INTL LTD

CTRP

20.4%

82114

GENERAL GROWTH PPTYS

GGP

8.6%

81115

HOME PROPERTIES INC

HME

15.5%

81008

AMB PROPERTY CORP

AMB

15.7%

80861

JONES LANG LASALLE INC

JLL

22.0%

78885

AVALONBAY CMNTYS INC

AVB

13.3%

78222

TANGER FACTORY OUTLET

SKT

9.6%

77041

FEDEX CORP

FDX

3.0%

76743

Unfortunately Heebner’s top positions significantly underperformed the market since the end of December. The weighted average return of these 30 stocks is 4.9% vs. nearly 9% return for the S&P 500 index. If Heebner had an equally weighted portfolio of these 30 stocks, he would have marginally outperformed the market. His top three picks had negative returns this year and significantly hurt his overall returns. He had nearly $700 Million in Ford at the end of December. Leon Cooperman’s Omega Advisors and Bill Miller’s Legg Mason Capital Management had around $100-$150 in Ford as well. Automotive stocks didn’t perform well so far in 2011. Leon Cooperman’s big GM bet went south as well.

Ken Heebner’s best performing stock picks were Priceline and CBG. Priceline returned 36.9% this year. Chris Shumway, Chase Coleman, and Michael Karsch were other hedge fund managers with large investments in PCLN. Ken Heebner had the second largest position in PCLN. CBG is also very popular among prominent hedge fund managers. Richard Blum had more than $550 Million in CBG and John Paulson had more than $275 Million invested in CBG at the end of December. The stock gained 30.4%.

We like to imitate Ken Heebner’s positions when there are other hedge fund managers with high conviction purchases in the same stocks. These people may pick the wrong stocks some of the time, but we believe we can reduce these errors by verifying their picks before making any trades.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Ken Heebner's 30 Favorite Stock Picks