Wednesday, September 17, 2008

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 in the sidebar 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).

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