Capital Growth Management, which currently operates as a subsidiary of Natixis Global Asset Management L.P., was established by Ken Heebner in 1990. Heebner is well-known for his courageous moves in the market, as he is often not afraid to make concentrated bets against the market. He can deliver astronomical results if his bets turn out to be right, but likewise, may suffer astronomical losses when the market moves in the opposite direction of his bets. For instance, Heebner’s losses reached 48% during the financial crisis of 2008. However, Capital Growth Management’s Focus fund has registered only a few money-losing years since its inception in 1997, and delivered an impressive cumulative return of 290.2% during the period of 2000 to 2010, often referred to as the lost decade. According to its most up-to-date 13F filing, Capital Growth Management oversees a public equity portfolio with a market value of $3.49 billion as of June 30, while its holdings are primarily diversified across the consumer discretionary, finance, and real estate sectors. Turning our attention to individual finance companies, Ken Heebner favored these three finance stocks during the second quarter: The Goldman Sachs Group Inc. (NYSE:GS), MetLife Inc. (NYSE:MET), and The Charles Schwab Corporation (NYSE:SCHW).
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole; yet investors have been stuck (until now) investing in all of a hedge fund’s stocks: the good, the bad, and the ugly. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? These top small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Even better, since the beginning of forward testing at the end of August 2012, the strategy worked just as our research predicted and then some, outperforming the market every year and returning 118% over the last 35 months, which is more than 60 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
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Capital Growth Management took a long position in The Goldman Sachs Group Inc. (NYSE:GS) during the second quarter. Heebner’s investment firm disclosed an ownership stake of 728,000 shares in the company, which is valued at $152.00 million as of June 30. Goldman Sachs recently acquired $16 billion in online deposits from General Electric Company (NYSE:GE), after the latter announced its plans to sell its banking operations unit, known as GE Capital, in an effort to simplify its business. Therefore, Goldman Sachs is acquiring $8 billion in online accounts and another $8 billion in brokered certificates of deposit owned by GE. The aforementioned deal, which also includes the software and technology used to operate the platform, will in turn strengthen the bank’s liquidity profile. Let’s not forget to mention that the shares of Goldman Sachs have gained 4% since the beginning of the current year. In the meantime, Warren Buffett’s Berkshire Hathaway is among the most bullish investors in The Goldman Sachs Group Inc. (NYSE:GS), owning a stake of 12.63 million shares as of June 30.
Capital Growth Management also purchased a new 3.12 million-share stake in MetLife Inc. (NYSE:MET) during the most recent quarter, which is valued at $131.57 million as of June 30. The shares of MetLife haven’t delivered substantial gains for its shareholders in 2015, increasing by slightly more than 1% year-to-date. The leading global provider of insurance, annuities, and employee benefit programs recently posted its financial results for the second quarter of the current year, reporting operating earnings of $1.8 billion, up by 11% year-over-year. At the same time, the company’s premiums, fees, and other revenues came to $12.2 billion, marking a decrease of 4% from the second quarter of 2014. It’s also worth mentioning that MetLife’s investment margins remained strong in spite of the continuing low interest rate environment, whereas the underwriting margins strengthened year-over-year for the fourth consecutive quarter. Andreas Halvorsen’s Viking Global Investors augmented its stake in MetLife Inc. (NYSE:MET) by 5.12 million shares during the second quarter to a holding of 11.78 million shares as of June 30.
Last but not least, the firm’s latest 13F filing also reveals that Capital Growth Management has taken a long position in The Charles Schwab Corporation (NYSE:SCHW). Ken Heebner’s investment firm currently holds a stake of 3.09 million shares of the company, which is valued at $100.89 million as of June 30. The shares of Charles Schwab, a leading provider of financial services, have gained nearly 14% so far this year. Just recently, the company released its Monthly Activity Report for July, indicating that the net new assets brought to the company in July by existing and new clients amounted to $9.8 billion. Charles Schwab also disclosed that the total client assets came to $2.56 billion at the end of July, increasing by 8% year-over-year and by 1% from the end of June 2015. At the same time, the company’s average interest-earning assets on its balance sheet reached a record of $158.2 billion through July, 15% more than in July 2014, and up by 2% since the end of June 2015. From the massive pool of over 700 hedge funds that we track, John Scully’s SPO Advisory Corp is among the largest shareholders in The Charles Schwab Corporation (NYSE:SCHW), holding an ownership stake of 26.18 million shares as of June 30.
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