I thought that it’s time to revisit Ken Heebner’s macro exposures after the recent WSJ article about Heebner making a big bet on Financials. I had written about Ken Heebner’s CGM Focus Fund before. CGM Focus has an excellent long term track record and its portfolio manager Heebner manages it as a high turnover fund to make large sector and macro bets.
My analysis shows that Ken Heebner is making more than just a bet on Financials, he is betting on a cyclical market recovery.
Financials an early-cycle sector
As the chart below shows, my reverse engineering of the CGM Focus Fund’s estimated exposures confirms the WSJ article about the extent of Ken Heebner’s overweight position in Financials:
Interest sensitive stocks such as Financials are early cycle movers. This exposure seems to be part of his overall theme of betting on a market recovery. The chart below shows the CGM Focus position in market beta, which shows the fund moving from a defensive position to an aggressive position:
I also estimated the fund’s exposure to the Morgan Stanley Cyclical Index and it shows a big bet on a cyclical recovery:
CGM Focus Fund has neutral to slight overweight positions in Technology, Energy and Materials. The fund's underweight positions are mainly in the defensive sectors such as Health Care...
…and Consumer Staples.
Ken Heebner, who went on record as having turned bullish in October, is showing now that he has turned really bullish.