Ken Heebner was one of the most popular 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&P500’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 March Ken Heebner was most bullish about the following stocks and he had at least $75 Million in each name:
Company | Ticker | Value (x1000) | Return |
TATA MTRS LTD | 274704 | -18.9% | |
PRICELINE COM INC | 274136 | -0.7% | |
NATIONAL OILWELL VARCO IN | 235432 | -10.2% | |
BAKER HUGHES INC | 222794 | -1.4% | |
CBS CORP NEW | 221354 | 5.7% | |
SCHLUMBERGER LTD | 219683 | -10.7% | |
ASML HOLDING N V | 216715 | -13.6% | |
LAM RESEARCH CORP | 198593 | -19.9% | |
UNITED CONTL HLDGS INC | 194266 | -4.3% | |
CSX CORP | 165139 | -4.5% | |
HALLIBURTON CO | 164970 | -3.4% | |
LYONDELLBASELL INDUSTRIES | 159782 | -3.1% | |
DELTA AIR LINES INC DEL | 155820 | -4.8% | |
WESTERN DIGITAL CORP | 134244 | -8.0% | |
CB RICHARD ELLIS GROUP IN | 128961 | -7.2% | |
INTL PAPER CO | 127963 | -0.9% | |
SIMON PPTY GROUP INC NEW | 116341 | 7.0% | |
MASSEY ENERGY CORP | 116212 | -4.7% | |
APPLE INC | 111000 | -3.0% | |
AFLAC INC | 110838 | -13.2% | |
SL GREEN RLTY CORP | 109040 | 12.9% | |
HOST HOTELS & RESORTS INC | 107782 | -6.2% | |
BHP BILLITON LTD | 102592 | -4.7% | |
BAIDU INC | 101290 | -7.9% | |
KLA-TENCOR CORP | 97952 | -13.8% | |
PEABODY ENERGY CORP | 94987 | -20.7% | |
JONES LANG LASALLE INC | 93756 | -6.6% | |
HOME PROPERTIES INC | 93133 | 1.7% | |
NORFOLK SOUTHERN CORP | 92676 | 2.1% | |
EQUITY RESIDENTIAL | 91948 | 6.0% | |
AMB PROPERTY CORP | 91724 | -4.5% | |
AVALONBAY CMNTYS INC | 90660 | 8.2% | |
BOSTON PROPERTIES INC | 87262 | 8.8% | |
DIAMONDROCK HOSPITALITY C | 86992 | -3.8% | |
PUBLIC STORAGE INC | 86510 | 3.2% | |
DEERE & CO | 86242 | -15.7% | |
ESSEX PPTY TR INC | 86180 | 8.7% | |
GENERAL GROWTH PPTYS INC | 85931 | 4.3% | |
TAUBMAN CTRS INC | 85460 | 8.1% | |
TANGER FACTORY OUTLET CTR | 82131 | 2.0% | |
FEDEX CORP | 77777 | -6.2% |
Unfortunately Heebner’s top positions underperformed the market since the end of March. The weighted average return of Heebner’s top stocks is -4.7% vs. -2.7% return for the S&P 500 index. If Heebner had an equally weighted portfolio of these stocks, he would have lost only 3.5%. His top three picks had negative returns this year and significantly hurt his overall returns. He had $275 Million in Tata Motors at the end of March. Tom Steyer’s Farallon and John Horseman’s Horseman Capital were bullish about TTM but their bets were much smaller than Heebner’s.
Ken Heebner also had nearly $275 Million in Priceline (PCLN). Priceline performed extremely well during the first quarter. It is fortunate that Heebner already had PCLN in his portfolio at the end of December. The stock lost 0.7% since the end of first quarter, so its momentum seems to come to an end. Andreas Halvorsen’s Viking Global and Paul Reeder’s Par Capital had large positions in PCLN at the end of March. Momentum chasing Jim Simons’ Renaissance and Ken Griffin’s Citadel also had around $250 Million invested in PCLN as well.
Ken Heebner’s energy bets weren't very profitable either. NOV lost 10.2% and Schlumberger dropped 10.7% since the end of March. The declines in Halliburton and Massey Energy were also sharper than the decline in S&P 500 index.
Ken Heebner is a very skilled fund manager but he doesn't seem to get out of his recent slump yet. 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.
