Capital Growth Management’s Ken Heebner is known for his big investment bets and stock trading prowess. What does CGM Focus fund’s legendary portfolio manager think of so called high-frequency, computer driven trading? Which unloved stocks is he investing in now and why is he closely monitoring developments in the Ukraine? He’ll answer those questions and more.
WEALTHTRACK Episode #1043; Originally Broadcast on APRIL 18, 2014
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Co-Founder, Capital Growth Management
Dear WEALTHTRACK Subscriber,
The U.S. stock market still offers tremendous opportunities and it is the best stock market in the world to invest in right now. Those are some of the insights shared by
Capital Growth Management‘s co-founder and portfolio manager, Ken Heebner on WEALTHTRACK this weekend. CGM Focus Fund’s legendary manager is known for his contrarian bets, concentrated portfolios and stock picking prowess. Currently he has invested heavily in homebuilders and related companies and two financial giants. Morgan Stanley, which just reported much better than expected results for the first quarter, is the fund’s largest holding. Citigroup is second. He will give us his views on both.
Heebner is also known for having periods of substantial outperformance and underperformance versus the markets and his peers. His five-year 13% annualized returns had him near the bottom of the pack recently, whereas his fifteen-year 15 percent annualized returns had him at the very top.
Heebner is also known for his active trading. According to Morningstar, Focus Fund’s turnover was close to 300% in the last year. But that’s glacial compared to the high-frequency trading done by computers, a topic which we also discussed with Heebner.
Is the stock market rigged? Have so-called high-frequency trading programs taken over the market? Are they taking unfair advantage of both individual and traditional institutional investors?
That is the headline making allegation by best-selling author Michael Lewis in his new book Flash Boys. Like other Lewis financial tales, such as The Big Short and Liar’s Poker, Flash Boys provides a fascinating inside look at otherwise hidden, arcane and significant Wall Street activities. In this case his focus is high-frequency, or high-speed trading which is just that. The computer-driven buying, selling and sometimes just ordering and canceling thousands of trades in milliseconds. We are talking about close to the speed of light here.
According to an article in Forbes.com, at the height of the tech bubble in 1999, one thousand stock quotes per second crossed the tape at the New York Stock Exchange. By last year that number had exploded to 2 million quotes per second. An estimated 90-95% of those quotes came from high-frequency trading systems, which also account for anywhere from 50-70% of all trading volume in U.S. stocks. The firms with the most sophisticated trading programs, computer algorithms, the fastest machines and speediest lines into the now 13 public stock exchanges and 40-50 so called dark pools are the ones with a competitive edge. According to Lewis, it is an unfair and sometimes even criminal advantage.
Not everyone agrees with him. Some vehemently disagree. We will have several informed opinions on the issue on our website wealthtrack.com. We will also get Ken Heebner’s view this weekend.
When you have a chance we also invite you to explore a new section on our website. It is called WEALTHTRACK WOMEN. We have interviewed a group of experienced women advisors who specialize in helping women plan their financial futures. Every week they will address specific issues and concerns raised by their women clients.
Have a Happy Easter, a great weekend and make the week ahead a profitable and productive one!
No One Investment this week.
No stock mentions in this episode.
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April 12, 3013
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Ken Heebner: On His Radar Screen
CGM Focus Fund’s legendary portfolio manager is closely monitoring developments in Ukraine for their market moving potential.