Better Know a Stock Picker

Welcome, Fools, to part 52 of our several-thousand-part series, "Better Know a Stock Picker," which is loosely (but not too loosely) based on Stephen Colbert's "Better Know a District" from The Colbert Report.

Like Stephen and his thorough investigations into America's Congressional districts, each week I take a look at a fund you may want to own. What's on tap this week?

CGM Focus (CGMFX)

Expense ratio

1.02%

Fund size

$2.98 billion

One-year return

32.59%

Five-year return

28.05%

10-year return

N/A

Source: Morningstar. Returns as of 7/25/2007.

Top 5 stock holdings

Company

% of Assets

Allegheny Technologies (NYSE:ATI)

8.73%

Vimpel Communications (NYSE:VIP)

7.76%

Goldman Sachs (NYSE:GS)

6.18%

Companhia Vale Do Rio Doce (NYSE:RIO)

5.58%

Freeport-McMoRan (NYSE:FCX)

5.57%

Source: Morningstar, as of 3/31/2007.

Meet Ken Heebner
The fightin' team at CGM Focus is led by Ken Heebner, who has been producing market-beating returns for the better part of 30 years. But the last five have really been superstantial. Since 2002, CGM has outdistanced the S&P 500 by more than 13 percentage points annually.

Actually, it's better than that. Since opening CGM Focus in 1997, Heebner has posted just one losing year -- 2002 -- and has been the top performer among his category peers in -- get this -- four of the past seven years.

You know exactly what Wall Street can do with those figures.

Or maybe we can let Heebner serve the main course himself. He's got a reputation for defying conventional wisdom, after all. For example, when the Street's stockinistas were talking up real estate in 2004, Heebner dumped homebuilders, preferring instead to load up on energy and industrial materials stocks.

How he invests
Why? According to a 2006 profile in Kiplinger's, Heebner bases his stock-picking decisions as much on broader economic analysis as valuation.

What's more, Heebner prefers to limit his choices, figuring he'd rather bet the bulk of his capital on his very best ideas. CGM Focus held just 19 stocks as of March 31.

Heebner will also employ just about any strategy that will make money, including short selling.  Seriously. At the same time he was dumping homebuilders in 2004, he was also shorting large consumer goods and telecom companies, reports Kiplinger's.

For a lesser investor, such boldness could easily result in portfolio suicide. But not Heebner. Here's how Motley Fool Champion Funds advisor Shannon Zimmerman put it in his April 2006 buy report for CGM Focus: "While its year-over-year performance can be choppy, this fund gets the job done, even when it isn't shooting out the lights."

Or, in simpler terms: Heebner is always focused on positive returns.

Is this fund for you?
Focus sports the sort of performance you expect from a hedge fund. Or, here in mutual-fund land, what we call either a "hybrid" or "long-short" fund. These funds are rarely attractive, since managers use the moniker as an excuse to jump on the trading treadmill and rack up fees.

Not so with CGM Focus. Heebner charges no loads and just 1.02% annually in expenses. Considering his long-term performance, that's almost crazy cheap. Almost enough to make me want to forego stocks altogether and hand over my savings.

But that would be silly. Heebner isn't the only fund manager out there delivering market-crushing performance. You'll find dozens more inhabiting Shannon's Champion Funds portfolio. (His picks are up more than 15% on their respective benchmarks as I write.) Here's how to get a no-strings-attached, 30-day free trial to the service.

And till next time, fund nation, good night.

For more Foolish coverage of hybrid funds:

Fool contributor Tim Beyers is a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Find Tim's portfolio here and his latest blog commentary here. CGM Focus is a Champion Funds recommendation. The Motley Fool's disclosure policy is championship-caliber.


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