Ken Heebner started the century making all the right moves for his CGM Focus (CGMFX) mutual fund. Deftly shifting into and out of sectors such as homebuilding and commodities, he posted returns averaging 32 percent annually from 2000 through 2007, a period when the Standard & Poor's 500-stock index returned just 1.7 percent a year. Then the magic stopped. CGM Focus, which Heebner runs from Boston, is the only domestic stock fund to trail at least 96 percent of its peers in 2008, 2009, and again this year, according to research firm Morningstar (MORN). The main culprits: bad bets on commodity and financial stocks. "He's been in all the wrong sectors at all the wrong times," says Jonathan Rahbar, a Morningstar analyst.
Even with the losses, Heebner is holding his spot atop the 10-year chart. CGM Focus returned an average of 17 percent a year in the decade ended May 31, the best record of more than 3,200 U.S. diversified mutual funds, Morningstar's data show. In second place was Lord Abbett Micro Cap Value, which gained 14 percent. Heebner, 69, the co-founder of Capital Growth Management, launched CGM Focus in 1997; it has returned 13 percent a year since then. He also manages CGM Mutual (LOMMX), which has returned 4 percent a year for the past decade, and CGM Realty (CGMRX), which gained 19 percent annually over the same stretch. He declined to be interviewed for this story.
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