Famed fund manager Ken Heebner of Capital Growth Management may be best known for his outstanding returns generated for investors (in excess of 290% from 2000-2010). Despite the extremely volatile market conditions during that time period, Heebner has kept his investing hand steady and sought solace in some of the biggest financial names like Citigroup and Morgan Stanley. In his latest 13F filing from September 30th, 2012, Heebner took on a number of new positions, with five of them standing out as his largest plays during that previous quarter. Here is our take on Heebner’s latest stock market moves:
Ford Motor Co. (NYSE:F) was a huge addition to Capital Growth’s portfolio, with almost $125mm worth of stock purchased. The automaker emerged from tumultuous times at the end of the last decade, hitting some harrowing lows in 2008 and early 2009. The company has seen a loss of market share globally and has seen stronger competition from brands such as Hyundai and Kia; union issues have also plagued the automaker in the recent past. However, as Ford resolves these problems and poises itself to operate and market itself more efficiently going forward, the car manufacturer may see glory days again, but we aren’t betting on that anytime in the near future (read more about Ford’s European woes here).
Historically, Heebner hasn’t devoted much of his capital to tech stocks, but he is hoping to change that with his new stake in Google, Inc. (NASDAQ:GOOG). Investing almost the same amount as he did in Ford, Heebner isn’t just wetting his feet; he’s making a statement by dropping 3% of his fund into the tech giant. The stock continues to be rewarding to investors, despite two earnings misses last year (including a 17.2% miss last reported quarter that brought on a slew of downgrades). Many just see these dips as opportunities to buy, and if your pockets are deep like Capital Growth’s are, you can do exactly that. By focusing on advertising and continually pushing into the operating system and hardware markets, Google is expected to grab even more market share in 2013. (Just how far can Google go from here?)
PulteGroup, Inc. (NYSE:PHM) was another addition, and the homebuilder joins Heebner’s other housing and REIT holdings such as Simon Property Group and SL Greene Realty Corp (SLG). PHM saw an incredible winning streak in 2012, netting investors who bought a year prior a triple-digit gain of 176%. This increase in price caused the trailing price to trade at 49 times earnings, but 2013 projections are a much more modest 18, which could spell out a combination of two possibilities for the next year: better earnings, and/or a drop in stock price. Wall Street analysts are agreeing with the latter, saying the stock is overheated and should see a drop in order to be inline with mean price targets. Heebner won’t have any solvency issues if this downturn occurs; we don’t recommend this play unless you have an extended holding horizon like Heebner.
Where else did Heebner put his fund’s billions?
Capital Growth Management’s fourth play was in home appliance manufacturing giant Whirlpool, Inc. (NYSE:WHR). The company has high hopes for 2013, as evidenced by their positive outlook outlined in their last earnings release. Whirlpool is anticipating larger margins, expansion into new markets, new products, and more streamlined operations for the next year. With impressive earnings per share of 6.14 and a low P/E growth ratio, existing valuations are low and they could improve further if their performance projections are correct.
Finally, the largest automotive retailer AutoNation (NYSE:AN) rounds out this list of new positions on his 13F filing and stands as his second new auto play. The stock posted consistently positive earnings last year, and they recently recorded a 15% increase in year-over-year sales last December. With such large operations, AN should continue to be a steady hitter in automotive sales; positive quarterly revenue and earnings growth support this. Perhaps Heebner is hoping for repeat 20%+ growth in the price per share for this year?
Disclosure: I do not own shares of any stocks mentioned in this article.