Heebner Bets The Farm On A Financial Recovery

A weekend Wall Street Journal article discussed how CGM Focus Fund's Kenneth Heebner is making a big beat on financial stocks, after betting against them in the past. Heebner is betting that banks and insurers will recover next year due to recent measures taken by the Treasury and Federal Reserve to bolster lending.

Heebner's bet has not paid off so far and his fund, which for years has beaten the market, is down a staggering 52% this year --- 11% below the S&P 500. But Heebner thinks his theme will eventually pay off.

Heebner's past track record gives him credibility. In 2007, Heebner's fund returned an amazing 80%, versus 5.5% for the S&P 500, and his 10-year record shows a 18% annual return.

As of the end of September, Heebner built a more than $1 billion combined position in Citigroup (NYSE: C) and Bank of America (NYSE: BAC). He put $780 million in two Brazilian banks, Banco Bradesco SA (NYSE: BBD) and Banco Itau Holding Financiera SA. His largest holding was Wells Fargo (NYSE: WFC). About 40% of CGM Focus' portfolio was in financial stocks as of Sept. 30.

Heebner also has some defensive picks in his portfolio, including positions in Wal-Mart (NYSE: WMT), McDonald's (NYSE: MCD) and gold stocks like Goldcorp (NYSE: GG) and Barrick Gold (NYSE: ABX).

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