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Ken Heebner co-founded Capital Growth Management in 1990 and has managed it ever since. The fund has grown to over $6 billion, largely because of Heebner’s track record; his Capital Growth Management was the best performing diversified U.S. stock fund over the last 10 years according to Business Week.

Heebner’s strategy is simple. He focuses solely on growth, even when that focus leads him to develop large bets on unpopular positions. For a long time, Heebner’s strategy seemed to work well, earning him a reputation as a bold, savvy investor. In fact, just three years ago, CNN Money called Ken Heebner “the best... fund manager around” and “America’s hottest investor.” However, Heebner’s performance of late has been less than stellar; since the end of the second quarter, his stock picks in his 13F portfolio have lost over 20%, compared with the S&P 500’s (NYSEARCA:SPY) 14.6% loss for the same period.

CompanyName

Ticker

Value (x1000)

Activity

Return Since June

NATIONAL OILWELL VARCO

NOV

233066

0%

-23%

FORD MOTOR CO DEL

F

230082

New

-27%

CITIGROUP INC

C

229303

New

-37%

OCCIDENTAL PETROLEUM

OXY

228378

1061%

-23%

BAIDU INC

BIDU

222386

116%

-10%

PRICELINE COM INC

PCLN

213475

-23%

-13%

C B S CORP NEW

CBS

186325

-26%

-22%

BAKER HUGHES INC

BHI

180478

-18%

-27%

CUMMINS INC

CMI

180073

New

-22%

BED BATH & BEYOND INC

BBBY

175986

New

-11%

HERBALIFE LTD

HLF

173496

New

-13%

HALLIBURTON COMPANY

HAL

168300

-0%

-27%

ROSS STORES INC

ROST

163445

New

-12%

TIFFANY & CO NEW

TIF

156035

New

-25%

WESTERN DIGITAL CORP

WDC

146248

12%

-27%

BORGWARNER INC

BWA

127648

New

-22%

SIMON PROPERTY GROUP

SPG

126188

0%

-4%

C B RICHARD ELLIS GROUP

CBG

121281

0%

-45%

S L GREEN REALTY CORP

SLG

120162

0%

-21%

HOST HOTELS & RESORTS INC

HST

103742

0%

-37%

FREEPORT MCMORAN

FCX

103684

New

-21%

EQUITY RESIDENTIAL

EQR

97800

0%

-6%

BOSTON PROPERTIES INC

BXP

97667

0%

-8%

AVALONBAY COMMUNITIES

AVB

96942

0%

-1%

HOME PROPERTIES INC

HME

96182

0%

3%

The low performance is no surprise considering that 3 of Heebner’s top 25 stock picks lost more than 33% and over one-quarter of his top picks lost 25% since June. Heebner’s largest losses were in CB Richard Ellis Group (NYSE:CBG), a favorite of Richard Blum (Blum Capital Partners); he lost 45% in the real estate company. Heebner also lost big in Host Hotels & Resorts Inc (NYSE:HST) and Citigroup Inc (NYSE:C), losing 37% in each position. Citigroup is one of Heebner’s larger positions (his third largest overall), almost twice the size of his position in CB Richard Ellis and more than twice the size of his position in Host Hotels. As such, his position in the company served to significantly lower his overall return, and he isn’t alone. Hedge fund managers John Paulson (see Paulson’s top stock picks), Bruce Berkowitz (Fairholme) and Ranfall Smith (Alden Global Capital) also lost big in the commercial bank.

Heebner did had some positive returns earlier in the year (read about it here), but his luck appears to be changing. Out of his top 25 stock picks, only one stock has generated a positive return since the end of June – Home Properties Inc (NYSE:HME). The real estate investment trust company earned a modest 3%. Hopes however are high for Home Properties; Israel Englander increased his position in the real estate company by 108% last quarter. Nine more of Heebner’s top stock picks did outperform the market, but only just, leading some critics to wonder if Heebner still has it.

We like Heebner but investors are cautioned against mirroring his top picks right now. The returns simply aren’t there. For investors who like a gamble, Heebner does have a strong track record and his top picks are certainly depressed in price; just remember that it is a gamble and, well, we told you so.



Disclosure: I am long C.

Source: Ken Heebner's Top Stock Picks