Ken Heebner, the mutual fund guru often compared to Fidelity legend Peter Lynch, is betting big on China, Brazil and — by extension — clearly no let-up in raging demand for raw materials.
Heebner's $7.39 billion CGM Focus fund has racked up five-year annualized returns of 34.91 percent and nearly 11 percent to date in 2008.
The S&P 500 is off 5.63 percent so far this year.
Many are calling for a big push into financials on an eventual U.S. recovery. Heebner is sticking with commodities: CGM Focus is heavily in invested global steel and oil companies like ArcelorMittal, U.S. Steel, Schlumberger, and Brazilian deep-sea oil leader Petrobras.
"Petrobras could become the biggest stock in the world," Heebner told Fortune.
It's a somewhat contrarian bet that growth in China and other big emerging markets won't be slowing down anytime soon. Among his more startling ideas: Oil will exceed $200 a barrel and steel prices will double.
He's also presuming that the U.S. economy is going to head into double-digit inflation inside five years, a scary enough proposition, and one that could cause his foreign-stock strategy to implode — if a U.S. slowdown triggers a round of global malaise.
But you can bet that if a slowdown is a real threat, Heebner won't be anywhere near the pain. His style is to bet big on what's next, then bail out at the first sign of trouble, rather than follow a thesis into a pit.
"I'm not waiting for Morgan Stanley to tell me there's something wrong in China. By then it's too late," he tells Fortune.
Heebner has taken long odds before: He got into copper miners in August 2005. Copper doubled soon enough. He went heavily into homebuilders and made a mint, getting out just a few months before the housing slide began.
He even shorted Countrywide, the mortgage lender, in October 2005. It took a while, but the troubled lender eventually caved and Heebner cleaned up.
As a result, CGM Focus trades — a lot. Fortune calculates that the fund holds 20 to 30 stocks at a time but bought and sold the equivalent of the whole portfolio nearly four times in a year. That trading pushes up costs for investors.
Among Heebner's current top holdings are:
• The Mosaic Company (MOS)
• Brazilian Petroleum Corporation (PBR)
• Vimpel-Communications (VIP)
• United States Steel Corporation (X)
• Hess Corporation (HES)
• Schlumberger, Ltd. (SLB)
• Deere & Company (DE)
• ArcelorMittal (MT)
• Transocean (RIG)
• Freeport-McMoRan Copper & Gold (FCX)
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