Heebner swings for fences with Morgan Stanley play

Buys nearly seven million shares of Wall Street titan; bank selling at major discount

Nov 14, 2011 @ 1:35 pm (Updated 2:01 pm) EST

Heebner: Concentrating his bets(Bloomberg News)
Heebner: Concentrating his bets(Bloomberg News)

Kenneth Heebner, who runs one of the top-performing U.S. stock mutual funds during the past decade, bought shares of Morgan Stanley as the bank posted its biggest quarterly drop since 1998.

Capital Growth Management LP purchased 6.9 million shares of New York-based Morgan Stanley, which owns the world's largest brokerage, during the three-month period that ended Sept. 30, according to a filing with the U.S. Securities and Exchange Commission today. The Boston-based money manager also bought new stakes in Apple Inc., United Continental Holdings Inc., Delta Air Lines Inc. and Ralph Lauren Corp.

Heebner's CGM Focus Fund returned 16 percent a year in the 10 years ended Jan. 31, the best record among more than 3,500 diversified U.S. stock funds, according to Morningstar. His performance has stalled in the past five years, trailing 83 percent of peers, according to data compiled by Bloomberg. Heebner, 71, is known for making concentrated bets on an industry and for shifting investments quickly.

Morgan Stanley declined 41 percent in the third quarter and sank to levels last seen during the financial crisis in 2008. The company earned more in the third quarter than analysts estimated following a $3.4 billion accounting gain and higher revenue from stock trading.

Financial Stocks

The Capital Growth filing showed the firm had 42 percent of its assets in financial companies, the largest sector holding. The biggest holdings in that industry were Citigroup Inc., Simon Property Group Inc. and Morgan Stanley, the document showed. Heebner trimmed his position in JPMorgan Chase & Co., selling about 365,000 shares.

Consumer discretionary stocks were the second-biggest group in the firm's portfolio, accounting for 27 percent. Priceline.com Inc. and Tiffany & Co. were the largest stakes in the group. Heebner added 877,000 shares of clothing retailer Ralph Lauren and 275,000 shares of Amazon.com Inc., the world's largest Internet retailer.

Heebner sold energy and health-care companies during the third quarter, exiting from positions in Occidental Petroleum Corp. and UnitedHealth Group Inc. His stake in energy stocks declined 15 percent from the prior quarter and for health-care companies, it fell 2.7 percent. Technology companies had the biggest boost from the last quarter in terms of Capital Growth's allocation, climbing 6.6 percent as Heebner also bought shares of MasterCard Inc., Visa Inc. and Google Inc.

--Bloomberg News--

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