Heebner Pukes His Positions

For the uninitiated, the term to puke indicates to flatten a position, usually the result of a stop loss.

I have written about Ken Heebner before – that he is a manager who runs a high turnover, high concentration portfolio with a good long-term track record. Heebner had a hot hand for the first half of 2008 in managing the CGM Focus Fund (CGMFX). The defining characteristic of the fund for 2008 had been its long commodity-short financials exposure – until now.

Using the techniques shown here titled Reverse engineering a manager's macro exposures, I updated my estimates of Heebner’s sector bets.

Surprise! Surprise!

Heebner is selling his off-the-charts overweight in commodity sectors (Energy, Materials):

He is also neutralizing his off-the-charts underweight position in financials:

Is this part of the risk control process?

Maybe he is demonstrating that he has a risk control process, particularly with the news that Heebner is starting a hedge fund. The chart below shows the performance of CGM Focus and the S&P 500 on a YTD basis. After an incredible first half 2008, CGM Focus gave up about 29% from June 2008 for a return that is roughly in line with the S&P 500.

Or maybe it’s not just hitting a stop loss, more on that in a future post…

Postscript:

As an aside, my “smart fund” sample remains overweight the commodity sectors and underweight financials (see this and this).

Comments

[whatanorder!:]

Congratulations, Cam. Your estimate was in part confirmed yesterday by KH himself on the financial channel (?CNBC)...paraphrase "...less than 10% commodity exposure...only hold Petrobras in Oil."
Good work
:-)Shawn

2008 Sep 18 01:36 PM

[Chancer:]

Since oil and commodities still look good long term, especially with a financial mess that forecasts greater inflation,I would guess that KH is "focusing Focus" on a shorter term. But I would never bet against him.

2008 Sep 18 02:00 PM

[puttster:]

LOL you'd never bet against a manager who lost 29% of his people's money in two months? jeez, just what would it take?

2008 Sep 19 10:19 AM

[killerkaul:]

lol...................... he didn't blow the charts off, the last 10 years being a putts.

2008 Sep 19 10:31 AM

[captightning:]

I've tried to outguess KH before......not a good idea.
Maybe he has seen what was coming, ( and has very recently shown up!), and anticipated others' (FED,etc) knee jerk reactions. Don't underestimate this man's uncanny ability to make money. I'm sticking out my Focus Fund position.

2008 Sep 19 05:41 PM

[captightning:]

and how much have you intrusted to Mr. Heebner lately....HMMM?


On Sep 19 10:19 AM puttster wrote:

> LOL you'd never bet against a manager who lost 29% of his people's
> money in two months? jeez, just what would it take?

2008 Sep 19 07:51 PM

[keithpiccir...:]

20 years investing with Heebner @ +20% year average. He just came on CNBC this morning with his newly positioned 30% portfolio in financials comment. Now he's positioned properly - just stayed too long in oil & commodities.
Mr. Hui, how do you discount the 400% portfolio limitations? As of 4:00 or so last night, feds actions caused many pros to head towards financials - in the weeks ahead will this tell who got there first?

2008 Sep 19 10:36 PM

[kolowesi:]

Glad I found you guys. I'm holding, but nervous. It's a good sign that he was on CNBC, right? Do you think that starting a hedge fund is a negative for this fund?

2008 Oct 07 12:29 PM

[User 275637:]

I got in at 50 and now im way underwater. I trust this guy but if he goes into HFs and leaves CGM I will be pissed.

2008 Oct 07 03:44 PM

[PWH:]

You can see exactly what he's holder in all the CGM funds as of the end of the third quarter (September 30, 2008) by pulling the NQ filings at sec.gov. CGM of course won't tell you what's changed between the end of June and the end of September. A big bet on two Brazilian banks, Citigroup, Wells Fargo...well you can get the report yourself. I just had a hard time finding out anything about the current portfolio, which I thought was important since it changes by the minute.

2008 Nov 25 05:52 PM