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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

TTM

274704

-18.9%

PRICELINE COM INC

PCLN

274136

-0.7%

NATIONAL OILWELL VARCO IN

NOV

235432

-10.2%

BAKER HUGHES INC

BHI

222794

-1.4%

CBS CORP NEW

CBS

221354

5.7%

SCHLUMBERGER LTD

SLB

219683

-10.7%

ASML HOLDING N V

ASML

216715

-13.6%

LAM RESEARCH CORP

LRCX

198593

-19.9%

UNITED CONTL HLDGS INC

UAL

194266

-4.3%

CSX CORP

CSX

165139

-4.5%

HALLIBURTON CO

HAL

164970

-3.4%

LYONDELLBASELL INDUSTRIES

LYB

159782

-3.1%

DELTA AIR LINES INC DEL

DAL

155820

-4.8%

WESTERN DIGITAL CORP

WDC

134244

-8.0%

CB RICHARD ELLIS GROUP IN

CBG

128961

-7.2%

INTL PAPER CO

IP

127963

-0.9%

SIMON PPTY GROUP INC NEW

SPG

116341

7.0%

MASSEY ENERGY CORP

MEE

116212

-4.7%

APPLE INC

AAPL

111000

-3.0%

AFLAC INC

AFL

110838

-13.2%

SL GREEN RLTY CORP

SLG

109040

12.9%

HOST HOTELS & RESORTS INC

HST

107782

-6.2%

BHP BILLITON LTD

BHP

102592

-4.7%

BAIDU INC

BIDU

101290

-7.9%

KLA-TENCOR CORP

KLAC

97952

-13.8%

PEABODY ENERGY CORP

BTU

94987

-20.7%

JONES LANG LASALLE INC

JLL

93756

-6.6%

HOME PROPERTIES INC

HME

93133

1.7%

NORFOLK SOUTHERN CORP

NSC

92676

2.1%

EQUITY RESIDENTIAL

EQR

91948

6.0%

AMB PROPERTY CORP

AMB

91724

-4.5%

AVALONBAY CMNTYS INC

AVB

90660

8.2%

BOSTON PROPERTIES INC

BXP

87262

8.8%

DIAMONDROCK HOSPITALITY C

DRH

86992

-3.8%

PUBLIC STORAGE INC

PSA

86510

3.2%

DEERE & CO

DE

86242

-15.7%

ESSEX PPTY TR INC

ESS

86180

8.7%

GENERAL GROWTH PPTYS INC

GGP

85931

4.3%

TAUBMAN CTRS INC

TCO

85460

8.1%

TANGER FACTORY OUTLET CTR

SKT

82131

2.0%

FEDEX CORP

FDX

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 (NASDAQ: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.

Source: Ken Heebner's Favorite Stock Picks