As Morgan Stanley slid, Kenneth Heebner bet big

Kenneth Heebner, whose CGM Focus Fund was one of the top-performing U.S. stock mutual funds over the past decade, bought shares of Morgan Stanley as the bank posted its biggest quarterly drop since 1998
NOV 29, 2011
Kenneth Heebner, whose CGM Focus Fund was one of the top-performing U.S. stock mutual funds over the past decade, bought shares of Morgan Stanley as the bank posted its biggest quarterly drop since 1998. His firm, Capital Growth Management LP, purchased 6.9 million shares of Morgan Stanley Ticker:(MS), which owns the world's largest brokerage firm, in the third quarter, according to a Nov. 14 filing with the Securities and Exchange Commission. Mr. Heebner also bought new stakes in Apple Inc. Ticker:(AAPL), Delta Air Lines Inc. Ticker:(DAL), Ralph Lauren Corp. Ticker:(RL) and United Continental Holdings Inc. Ticker:(UAL). CGM Focus returned an annualized 16% over the 10-year period ended Jan. 31, the best record among more than 3,500 diversified U.S. stock funds, according to Morningstar Inc. Mr. Heebner's performance has stalled in the past five years, trailing 83% of peers, according to data compiled by Bloomberg. He is known for making concentrated bets on an industry and for shifting investments quickly. Morgan Stanley shares declined 41% 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 had estimated, following a $3.4 billion accounting gain and higher revenue from stock trading.

FINANCIAL COMPANIES

The Capital Growth filing showed that the firm had 42% of its assets in financial companies, the largest sector holding. The biggest holdings in that industry were Citigroup Inc. Ticker:(C), Simon Property Group Inc. Ticker:(SPG) and Morgan Stanley, the document showed. Mr. Heebner trimmed his position in JPMorgan Chase & Co. Ticker:(JPM), selling about 365,000 shares. Consumer discretionary stocks were the second-biggest group in the firm's portfolio, accounting for 27%. Priceline.com Inc. Ticker:(PCLN) and Tiffany & Co. Ticker:(TIF) were the largest stakes in the group. Mr. Heebner added 877,000 shares of clothing retailer Ralph Lauren and 275,000 shares of online retailer Amazon.com Inc. Ticker:(AMZN). He sold energy and health care companies during the third quarter, exiting from positions in Occidental Petroleum Corp. Ticker:(OXY) and UnitedHealth Group Inc. Ticker:(UNH). Mr. Heebner's stake in energy stocks declined 15% from the prior quarter, and for health care companies, it fell 2.7%. Technology companies had the biggest boost from the prior quarter in terms of Capital Growth's allocation, climbing 6.6% as he bought shares of Google Inc. Ticker:(GOOG), MasterCard Inc. Ticker:(MA) and Visa Inc. Ticker:(V).

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