America's Hottest Investor (pg. 3)
One oil expert Heebner has consulted is Matthew Simmons, a Houston-based investment banker who's become the oracle of "peak oil" since his book Twilight in the Desert was published in 2005. Twilight argues that Saudi Arabia is running out of oil faster than we think, and Heebner's own research leads him to the same conclusion.
Simmons says he first met with Heebner around the time Twilight was going to press. Heebner spread out on CGM's conference room table a map of Ghawar, the world's largest oilfield. "I thought, 'Jesus, most of the people in the money-management business don't have any idea what any of the Saudi Arabian oil fields are called, much less where they are or what their production history is. But Kenny Heebner has a blown-up, detailed map of Ghawar that's better than anything I've ever seen,'" recalls Simmons. "Then he says, 'Let me tell you what I'm hearing.' Turns out he'd been digging up retirees from the oil business and finding people who were willing to talk. About an hour and a half later, I walked out and said, 'That guy is amazing.'" (CGM has become one of Simmons & Co.'s biggest clients.)
Heebner enjoys his job enormously, which is the key to his longevity. "It's not a business for him, it's a pleasure," says his brother Jeffrey, 70, who ran a home-security business before retiring. Jeff says his brother is truly married to his work, which is why he was happily surprised when Ken got married at age 60. (Ken's wife, Renie, a microcap fund manager at another Boston firm, declined to be interviewed.) In fact, the line between pleasure and obsession sometimes gets a little blurry. Heebner doesn't take vacations, he insists he'll never retire, he knows less about pop culture than my 8-year-old twins (which, come to think of it, may be a good thing), and other than sailing and politics, he has few interests outside the investing world.
Even his morning commute - a half-mile walk from his home on Beacon Hill to Boston's financial district - is spent in deep thought about his stocks and the markets. Arthur Bauernfeind, chairman of Westfield Capital and a friend of Heebner's from their days together at Loomis, recalls once bumping into a snow-covered Heebner on the Loomis elevator on the way to work. When Bauernfeind started making small talk about the wintry weather, an oblivious Heebner looked up and asked, "Is it snowing?"
Heebner's intensity and one-track mind used to come with a volcanic temper, but Janine Hermsdorf, Heebner's head trader until her retirement in December, says he's mellowed with age. That said, the one time you still want to steer clear of him is the Friday before any three-day weekend. "It's like clockwork," says Hermsdorf, who otherwise sings Heebner's praises as a boss and friend. "He'll get agitated because he's not going to be trading for three days."
For better or for worse, the hyperactive trading has always been one of Heebner's calling cards. The turnover rate in CGM Focus, which typically holds 20 to 30 stocks at a time, was a whopping 384% last year, which in theory means he traded enough to buy and sell the entire portfolio nearly four times. Indeed, CGM's trading costs are sufficiently high that Hermsdorf was called on the carpet by one institutional client who, despite CGM's superior returns, was livid about its inflated VWAP, or volume-weighted average price, which is a measure of trading efficiency. "I thought the guy was going to eat me, he was so mad," she says.
Jeff Heebner says that his brother has always been a little obsessed with making a buck - even though spending it has never been his thing. Jeff recalls Ken showing up at Thanksgiving one year in a car so beat up that it was leaking gasoline. And Jeff has repeatedly begged his brother to replace the 45-foot sloop Nunaga - purchased used in 1987 - with a new sailboat. "I keep telling him to get something bigger," Jeff says. "I worry he's going to drown in that thing someday."
It's the same story with his office. Located on the 45th floor of a tony Boston high-rise, it boasts a million-dollar view of Boston Harbor. On a clear day you can even see Cape Cod. But the interior looks as though he's barely unpacked. Award plaques sit unhung on the floor. There's a photograph near his desk of Acadia National Park in Maine that's been so bleached out by the sun it's unrecognizable. And while Heebner does have a stylish Kieninger clock on his wall, it doesn't work. "I haven't gotten around to getting it fixed," he says.
Heebner grew up in Philadelphia, the son of George Heebner, a building contractor, and Ruth Heebner, a homemaker. His paternal grandfather was a farmer in Pennsylvania Dutch country, where the town of Heebnerville bears the family name.
Heebner inherited his work ethic as well as his love of sailing from his dad. George, Ken, Jeff, and youngest brother Donald would go on weekend excursions on their 42-foot boat, but Ken was the only Heebner boy who truly loved being out on the open water. A reluctant sailor himself, Jeff recalls a particularly harrowing voyage across Chesapeake Bay when they got caught in a storm. "I'm looking for the life preserver," he says. "And I look back at Ken, and he's kneeling on the seat with the steering wheel in his hand, smiling ear to ear. My knees are shaking, and he's having the time of his life."
Heebner was also the family bookworm, and his grades were good enough to take him to Amherst College and then on to Harvard Business School. He is one of a handful of business celebrities from the HBS class of 1965 - former IBM CEO Louis Gerstner, consultant Ram Charan, and New England Patriots owner Bob Kraft are some others - but Heebner apparently made little impression on his classmates. "Ken was a very quiet guy," recalls fellow HBS '65 alum John Herrell, former chief administrator of the Mayo Clinic. "He didn't stand out." Adds another Harvard classmate, executive search consultant Tony Price: "There's nothing I recall about Ken that suggested the kind of success he's had as an investor. He was relatively quiet in a group of individuals who were pretty dynamic."
"They didn't know him well enough," counters John Henry (a retired Philadelphia businessman, not the Boston Red Sox owner of the same name), who knew Heebner at both Amherst and Harvard. "Ken did march to his own drumbeat, but he was absolutely brilliant. I never, ever doubted that he was going to be a great investor." Henry, himself a long-time shareholder in Heebner's funds, says what first impressed him about Heebner was a little gambit he had going in finance class. Classmates would bring him silver dollars, which Heebner would exchange for dollar bills. Says Henry: "Ken was hoarding silver dollars on the idea that silver was going to keep appreciating, which would eventually force the Treasury to stop issuing new silver coins." And that's exactly what happened. "It was funny as hell - he'd be sitting there with piles of silver dollars on his desk - but Ken had it nailed," Henry says. "He saw something the rest of us didn't. That's Ken - that's always been Ken."