The sharp Boston-based guru reverses his stance on financials and goes long. Another in a growing group of “perma bears” who have turned bullish. He’s an investor, not a trader, so like Grantham et al, he’s early. But probably not wrong.
After making a fortune betting against financial stocks until this summer, mutual-fund manager Kenneth Heebner is turning bullish on the sector.
Mr. Heebner, who runs one of last year’s best-performing mutual funds, is sure banks and insurers will recover next year, thanks to Treasury Department and Federal Reserve efforts to bolster lending.
” align=”left” size=”xlarge” nocrop=”true” clear=”true”] “A year from now, credit will be available because of the government’s actions,” said Mr. Heebner, who works at CGM Funds in Boston.
Only time will tell if he is right. Meanwhile, that switch has harmed his performance lately.
His CGM Focus fund, which for years has posted a string of market-beating returns, this year is lagging behind the Standard & Poor’s 500-stock index by 11 percentage points. For only the second time in his 11-year tenure, he is in the red, off 52%. But the money manager, who often goes against prevailing trends, contends his plan eventually will pay off.
CGM Focus is famous for betting big on a few economic themes. This risk-loving fund often is at the top of its “large blend” fund category — which buys both quickly expanding growth stocks and cheap value stocks — but sometimes near the bottom, such as now and, most recently, in 2004.
For the most part, Mr. Heebner’s track record is reassuring. Last year, CGM Focus was the No. 1 diversified U.S. stock mutual fund of more than 4,500 distinct offerings. Its 80% total return in 2007 dwarfed the S&P 500’s 5.5% showing. The fund has one of the best 10-year records, returning 18% annually, while the S&P 500, after many gyrations, has returned to its 1998 level.