CGMFX is Too GOOD!
Posted by Frugal on October 19th, 2007
I saw this article the other day from thestreet.com. It spoke about CGMFX returning 50% in two months. That is simply INCREDIBLE for a mutual fund.
Don’t know if any of you picked up some shares in CGMFX or CGMRX when I first blogged about Ken Heebner and his funds back in April 2007. Heebner moves faster than you can track him. At that time, he was bearish on real estate stocks, bullish on mining and infrastructure stocks, neutral and slighly bullish on brokerage financial stocks. I think I checked his holdings, and he was holding brokerage stocks at one time. But he got out quickly for sure, and both of his CGMFX and CGMRX (supposedly a real estate fund) are showing big holdings in energy/infrastructure names. Yeah, he moves FAST.
If there is a second example of failure of Efficient Market Hypothesis (EMH) besides Warren Buffet, I would say Heebner is high on the list. He has beaten indexes year after year for so many years now. Incredibly record. I have to seriously consider buying his CGMFX really. Maybe EMH is garbage. Or at least it’s a garbage theory definitely to Heebner and the fund holders personally. Some people I guess can really time the market. And timing the market with a big mutual fund portfolio is certainly much harder than a small individual portfolio.
Don’t invest just based on my advice. Caution is always advised. Disclosure: I currently don’t hold CGMFX or CGMRX, but I wish I did 10 years ago.
More related posts:
Digg it Del.icio.us Reddit Furl BlinkList Newsvine Yahoo MyWeb
October 21st, 2007 at 1:07 pm
I definitely view EMH as garbage. It is very interesting that the majority of investors who outperform the market on a consistent basis, usually are value investors. Buffet gave a speech about this back in 84 called “The Superinvestors of Graham and Doddsvillle”. It is worth reading if you are questioning the validity of the Efficient Market Hypothesis.
October 22nd, 2007 at 1:04 am
Growing-Wallet,
The biggest problem with anti-EMH arguments is that most of the time “the majority of investors who outperform the market on a consistent basis” can easily be explained by statistical distribution of all varied performances.
You may think that it’s impossible to have 100 people who can throw 20 consecutive heads in one shot when flipping coins. But if you have 1 billion people trying to do that, you probably will end up with 1000 “outstanding” people. Now, the question is that are these people truly with some super-natural power, or valued investors, or they simply got lucky??
You could view EMH as garbage. However, as far as I know, there may be only 1 statistical anomaly so far who is Warren Buffet. The rest of us among billions of people can be easily explained by the statistical theories.
Even then, I have a different take on EMH which is a middle ground between passive and active investing. I don’t have time to elaborate it in the comment section, but it is definitely related to why/how more of the outperformers are value investors. At the end of statistical tally, the whole picture remains the same. But I actually believe that individuals can change their relative standing, while collectively we cannot change the overall performance to an out-performance.
October 27th, 2007 at 9:29 am
CGMFX has decoupled from the top ten holdings of (6-30-07) in the last two trading days ending Oct 27. It likely indicates he has sold and made other purchases. Hopefully he took alot of profit and found a new path upwards.
Also, the coin flipping test does not account for intelligence. Some people are just smarter and over time out perform others. Behind all funds are humans.
Ken Heebner is obviously superior than most in both vision and dicipline. His holdings still have to meet criteria when going in, and must be sold when they are overbought. That is how he must operate to explain his superior performance.
His funds have out performed Warren Buffetts consistently. Nothing against WB he is a stabilizing light for impulsive investors
Ken seems quite a bit more bold and it appears that has translated into higher earnings. I have owned CGMFX for 5 years
and have learned to be comfortable with higher volitility.
October 27th, 2007 at 10:47 am
His record hasn’t always been so good, check back far enough and you will see.
October 27th, 2007 at 11:20 am
I have tracked him since inceptions. He has clearly out performed. Are you suggesting finding someone with a perfect record? No human will ever have that.
The point is, In the spectrum of human capability he is on top, and not a flash in the pan. Another point is that a mistake a long time ago is valueless today. I am sure he has learned from his very few mistakes even much more than others.
His performance in recent years is more indicative of his savy than in earlier years as with everyone capable of learning over time. If Ken has one fault I would say he may overestimate othe peoples intelligence. He did not think Houses like Merrill Lynch would hold toxic sub prime paper and they did. Being human I can allow a little slip up here and there. It still remains his charts make others look like no more than index proxies or worse! You need more courage. Have you watched his video interviews on Google?
I have accumulated 4000+ shares, trust me, I have done my homework. I have also rode the dotcom bubble and will dump on a days notice, which you can always do. The thing is you have to be totally emotionless about this. As much as I like his performance. I would park all in one day if I am too nervious.
But as I said, having been in for over 5 years I am ok with higher volativity.
Downside risk has shown to be a non issue. Now if you are looking to get in and out in one quarter, you may encounter risk, If you can’t tolerate risk go to fixed securities.
October 28th, 2007 at 9:20 pm
My point about coin-flipping (without intelligence) is exactly that. How can you tell a smart person that out-smart 20 times consecutively, from a lucky person that got lucky 20 times consecutively? As I stated, that out of every 1 billion investors, there simply exists 1000 such lucky investors from the law of probability. And I bet you that those 1000 lucky guys will tell you that they are really smart, and not lucky.
And looking at the record of a smart guy versus lucky guy, it will be hard to tell the difference.
October 29th, 2007 at 9:09 am
The statement you made:
“the majority of investors who outperform the market on a consistent basis” can easily be explained by statistical distribution of all varied performances.
Is simply wrong.
The majority who are winning will have the common ingredient of
just being smarter. The exception will be the one in a thousand who got lucky. For every one lucky investor there will be many winning investors who are winning because they are superior.
investing in the market is a competition against other investors.
It it typically based on taking a position BEFORE another investor does wheter being long or short. It is true that a blind squirrel will find a nut sooner or later but a squirrel who can see will find many more.
October 29th, 2007 at 9:40 am
The bottom line, taking all statistical analysis and your “coin flipping” into account, is that for the last 7-8 years that I have held CGMFX and CGMRX, Ken Heebner has been nothing short of brilliant at predicting market trends and stock picking, period. I suspect that hundreds of other fund managers would donate their first-born children to have his skill in the marketplace. When he retires, I probably will retire my CGM holdings too.
October 29th, 2007 at 11:01 am
I think vigilence is the order going forward. I know he is wide awake. However I see that the stocks in the 6-30 report are moving up but the fund has not in the last two trading days. I hope he has taken profit. The recent rise is huge. I can’t see it continuing. Any new news please post as I will too.
December 19th, 2007 at 9:26 pm
I will cash out of CGMFX only when Ken Heebner leaves.
December 26th, 2007 at 12:28 am
When is a good time to get into CGMFX? Should I wait until the beginning of the year?
December 28th, 2007 at 9:09 am
Two days ago was a good time to get out. What happened?
December 28th, 2007 at 8:31 pm
The fund had a capital gains distribution. If you look at the NAV it appears that the fund value went way down but the difference was cash distributed to fund shareholders. If you hold the shares in an IRA or other tax deferred account it is no problem. If you hold the shares in a taxable account you will probably owe tax on the distribution. My tax deferred IRA account is set up to just reinvest the distribution to buy more shares so I now own 19% more shares than I did on November 30th. The value of my CGMFX shares is almost 10% higher than it was on November 30th. Not too shabby a one month performance…
January 3rd, 2008 at 10:08 am
Steve is right.
The fund annually in late December distributes the capital gains for the year and you either get the check or rollover (as I do). Mine’s not in a tax deferred account so I get stuck with the tax hit. It’s a pain, but when you gain it comes with the territory, so no whine here.
I’ve owned CGMFX since ’98 and it has performed magnificently. My initial investment is now valued at 10X its original dollar amount.
March 8th, 2008 at 7:51 pm
I have heard this on other sites, it you buy in middle of year, then come december, the dividend distribution comes you pay full taxs on the year, even if you only held for half. Is this correct or a really bad rumor being spread on forums internet wide??? I hope this is false becase I was thinking about getting into the fund… but I dont wanna pay for gains I havent had!
thanks in advance
May 16th, 2008 at 2:35 pm
If you earned 5000 dollars on 12/31, you would pay taxes on it. What’s the difference?
June 6th, 2008 at 2:47 pm
First time I’ve read this. Would like to know when is a good time to buy CGMFX
June 6th, 2008 at 2:47 pm
First time I’ve read this. Would like to know when is a good time to buy CGMFX
June 6th, 2008 at 2:48 pm
First time I’ve read this.Should I wait to buy into CGMFX
June 6th, 2008 at 2:48 pm
First time I’ve read this.Should I wait to buy into CGMFX
June 6th, 2008 at 2:49 pm
First time I’ve read this.Should I wait to buy into CGMFX
June 6th, 2008 at 2:51 pm
First time I’ve read about CGMFX, would like to get more updates
June 6th, 2008 at 2:57 pm
Never bought CGMFX and never heard of Ken Heebner,But would like to know more and get updates. Thankyou
June 6th, 2008 at 2:57 pm
Never bought CGMFX and never heard of Ken Heebner,But would like to know more and get updates. Thankyou
June 6th, 2008 at 2:59 pm
Please send me updates
June 6th, 2008 at 2:59 pm
Please send me updates
June 6th, 2008 at 3:01 pm
I,m getting hammered in my fund portfolio, need updates to get out of this mess.
June 6th, 2008 at 3:01 pm
I,m getting hammered in my fund portfolio, need updates to get out of this mess.
June 6th, 2008 at 3:01 pm
I,m getting hammered in my fund portfolio, need updates to get out of this mess.
June 6th, 2008 at 3:01 pm
I,m getting hammered in my fund portfolio, need updates to get out of this mess.
June 6th, 2008 at 3:01 pm
I,m getting hammered in my fund portfolio, need updates to get out of this mess.
June 9th, 2008 at 1:19 pm
During my bachelor days at Uni my econ professor was a big believer in EFM. I tried to write a paper saying that I thought it was garbage…..I failed.
BTW- I just learned Canadians cannot buy us funds. Shame because I would love to buy some CMG.
June 10th, 2008 at 7:15 am
damn it – today for the first time I read about this guy and CMGFX. Amazing time and bold moves. missed big time on this guy.
July 5th, 2008 at 8:09 am
All, there is not “too late” with this guy! It is not like he owns a universe of stocks that have rallied & he is just sitting on them. He flips out of his entire porfolio like a madman! He just recentl took a +5% hit, possible due to market, possibly because he is rotating his positions. Whenever he make a major shift in his portfolio, you can see it in the short term (1-3 day) returns. But, there is never a “too late” with this guy. Think about it, you buy GOOG @ $90 and sell @ $500, then buy POT @ $50 and sell @ $110, then you are in cash for a day, then you buy YHOO @ $16 and sell @ $22. When in there was it too late? Everyone on the “street” knows about Ken Heebner & NO ONE wants to be on the other side of his trades! He is a genious & can easily be compared to Peter Lynch in his prime!!!!!! Buy the fund now, buy it next week, average in, whatever, this is a great fund!
July 21st, 2008 at 4:24 am
For all of you who want to buy CGMCX and cannot for one reason or another, there’s another option that’s equally good, less expensive and doesn’t put limitations if you’re not a US citizen: look up the major holdings of the fund and simply buy them with the same ratios.
Do this excercise every quarter and you’ve got an almost ‘mirror’ of cgmfx or whatever fund you like.
Works 90% of the time.
Cheers
S
July 29th, 2008 at 8:02 pm
why did CGMFX go down today with the market up 266 pts. and the funds holdings in the green ??
July 30th, 2008 at 7:06 am
I don’t know why CGMFX went down when the market was up big. Not only that, but if you looked at its top 10 holdings most of them were up, many over 4% In fact his largest holding (US Steel) was up 14% for the day. There’s no reason why it went down unless the remainder of its holdings really tanked, which I really don’t think is the case. The past month has been rough and I can’t find a reason for it and it’s quite frustrating. Can anyone shed some light on the reason for the down turn?
July 30th, 2008 at 7:18 am
I have been in CGMFX for some time now. I am up well over 200%. I have seen this before. Typically it is when he is rotating his positions. Remember, the positions posted date back to the end of June “ish”. There seems to be a major shift going on in the market with the stocks that CGMFX held starting to fall out of favor. Since he is usually in-tune with the market, my bet is that he is selling & moving to other stocks. Thus causing his portfolio to not match the normal returns for this short period of time. I look forward to seeing his reported holdings for this period.
Please understand, this is simply my opinion. I don’t have any inside info. Just based on my past experience with this fund.
July 30th, 2008 at 7:45 am
The explanation is very simple, true US steel was up 12% but look at the rest of the major holdings – 8 out of 10 are down, some by as much as 11.5%
Go to Yahoo finance or MSN and you’ll see the full picture.
My question is how could such a good guy with all these commendations be so off in his stock picks, how was he not able to take advantage of yesterday’s 2.4% rebound?
I suppose no one is immune to bad selections, and the key to mutual funds is long, long term.
Cheers
December 10th, 2008 at 2:18 pm
I leaarned of Heebner in mmid-2008. I was very impressesd with what I read. I bought CGMFX at $61. What should I do now, average down?
December 10th, 2008 at 2:18 pm
I leaarned of Heebner in mmid-2008. I was very impressesd with what I read. I bought CGMFX at $61. What should I do now, average down?
December 10th, 2008 at 2:19 pm
I leaarned of Heebner in mmid-2008. I was very impressesd with what I read. I bought CGMFX at $61. What should I do now, average down?
March 8th, 2010 at 4:54 pm
And now?
April 8th, 2010 at 1:21 am
Hah, good question Doodle. This fund has underperformed the S&P 500 over the past five years, and that’s before the phenomenal tax hit that it must kick out if you are unlucky enough to own this in a taxable account. Ouch. It gets worse. Even over the 10-year period, Morningstar found that although the fund itself had returned nearly 19% annually, the average investor in the fund realized a return of negative 11.5%. That’s right, -11.5%.
Stop chasing returns, stop accepting manager risk, and start capturing as much market return as possible. As John Bogle put it, “The realistic epitome of investment success is to realize the highest possible portion of the market returns earned in the financial asset class in which you invest…recognizing and accepting that that portion will be less than 100 percent.”