Ken Heebner's Trading for CGM Focus (CGMFX) Tripled in 2008

I am glad to see this by Ken Heebner; it makes me feel almost normal that I've had to turn over positions so quickly to survive latter 2007 and 2008. He was a bit early on his move into life insurers at the end of 2008 as they suffered terrible losses in the downturn of Jan-Feb 09 [Feb 18: Ken Heebner's Fourth Quarter 2008 Moves] but assuming he held on, it is working out splendidly for him now. We should have an update of March 31 holdings next week, although by now (6 weeks later) they may have all changed. ;)

Via Bloomberg

• Kenneth Heebner, the top-ranked U.S. fund manager in the past decade, almost tripled the value of trades by his CGM Focus Fund last year as he shifted out of oil stocks and invested $3 billion of new shareholder cash.
• Heebner bought and sold $82 billion of securities, producing $71 million in commissions for brokerages including Citigroup Inc. and Merrill Lynch & Co., according to an April 27 regulatory filing by his Boston-based fund. He paid $18 million in commissions on $29 billion of transactions in 2007.
• Investors poured into CGM Focus during the first six months of last year, after it returned 80 percent in 2007, the most among U.S. diversified stock funds. That forced Heebner to increase stock purchases. As returns fell through 2008, shareholders bailed out, requiring the manager to sell assets.
  
• CGM Focus ended the year with a 48 percent loss, compared with a 37 percent decline by the Standard & Poor’s 500 Index.
• Martha Maguire, a spokeswoman for Capital Growth Management LP, said the increased trading and commissions resulted from inflows and outflows of investor funds. “The brokerage transactions reflect buying and selling,” she said.
• CGM Focus shareholders withdrew a net $347 million in the second half of the year, according to a Feb. 27 filing with the U.S. Securities and Exchange Commission. The fund had about $4.2 billion in assets on Dec. 31. The withdrawals have continued into 2009, according to Chicago-based research firm Morningstar Inc. Investors removed about 5.3 percent of year-end assets, or $219.2 million, from January through March, Morningstar estimated.
• “What happened in ‘08 was Ken got whipsawed,” said A. Michael Lipper, the managing member of LSF Capital Advisors LLC, a Summit, New Jersey, firm that invests in financial-services companies. “With his very good long-term record, money came in and some of that money was hot money that was very sensitive to short-term performance.”
• Known as “Bigfoot” for his large movements in and out of stocks, Heebner sold CGM Focus’s stakes in oil and metals companies in the third quarter of 2008, incurring “major losses,” according to the fund’s annual report. CGM Focus invested in financial-services companies during the quarter, only to get hit with more losses when those stocks slumped. By the end of the year, it held stock in insurers, drugmakers, and metals and mining companies.
• The fund had a portfolio turnover rate of 504 percent last year, according to the annual report filed with the SEC on Feb. 27. The average portfolio turnover rate for a diversified U.S. stock fund is 97 percent, according to Morningstar. The turnover rate is calculated by dividing the lesser of security purchases and sales by average monthly assets.

It actually says a lot about the short term type of culture we've built when even the average fund is literally turning over their entire portfolio once a year. Everyone is now a swing trader. But that's the market we have - so adapt or die.

[May 28, 2008: Ken Heebner - America's Hottest Investor]
[Sep 10, 2008: Ken Heebner to Launch Hedge Fund]
[Nov 14, 2008: Ken Heebner Moves into Financials Big Time]