Investment Education - Three Tricks for Turning $10,000 into $99,638

Three Tricks for Turning $10,000
into $99,638
By Dr. Steve Sjuggerud
June 17, 2008

If you had invested $10,000 with Ken Heebner 10 years ago, you'd have $99,638 today.

That's how much Ken's CGM Focus Fund has returned since 1998. The annualized gain has been nearly 26% a year... which is even more impressive when you consider that, over the last 10 years, stocks have done nothing. Cash in the bank (earning interest) has beaten the stock market!

Ken's CGM Focus Fund (CGMFX) is the best-performing U.S. stock mutual fund over the last 10 years, according to Morningstar. And Fortune put him on the cover of its most recent issue. The article claimed, "We may well be witnessing the most dazzling run of stock picking in mutual fund history."

Before you think Ken's extraordinary performance might just be luck... he also has the fourth-best performing mutual fund on Morningstar's list: CGM Realty Fund (CGMRX). Can you believe it? Out of 3,000+ funds, Ken was able to make a real estate fund a top performer!

So what's his secret? How does he invest? Actually he has a few "tricks" you can easily use yourself to boost your investment returns and always ensure that you're "in the money."

Here's how Heebner works...

First, once he's convinced on an idea, he's not afraid to make a big bet. The he holds onto that bet for a very long time. But importantly, he's not afraid to cut a position.

For example... in December 2000, he started buying homebuilders and took a huge stake. But in January 2005 (just months before the peak), he sold off every share of every homebuilder he owned. Shares of homebuilders soared hundreds of percent, and he got in early and got out before they crashed.

He then made a huge bet on commodities... He has more than three-quarters of the fund in energy and industrial materials stocks, according to latest numbers at Morningstar. Three of his top four holdings are steel stocks. Heebner told Fortune he thinks "steel prices could double and oil could blow past $200 a barrel."

In most people's eyes, Peter Lynch, who ran the legendary Magellan Fund for 13 years, holds the title of the greatest mutual fund manager in history. And Peter has nothing but respect for Ken... In fact, he tried to recruit him. Peter told Fortune: "Ken is very thematic, and stays with things for a very long time. But once he's convinced that something is deteriorating, that's it."

Heebner's mentor, Bob Kemp, agrees, saying Heebner knows when to cut his losses. "A lot of fund managers fall in love with an idea and ride it all the way down. Ken's quick to admit when he's wrong."

How to Turn Flat Stocks into Triple-Digit Winners

How You Can Spot Great Buys Early On

Whatever stocks do over the next 10 years, Ken will still likely do well... Ken's secrets are the classic secrets to making big money in the stock market. Here's what you can do to see returns like Ken's...

1)	Once you've done your homework, make a significant bet.
2)	Don't sell early... Stick with a theme as long as it's working.
3)	Be quick to admit when you're wrong.

The thing is, they're all easier said than done. Ken's been able to do all three without hesitation over his career. And that's how he became the best fund manager in America over the last 10 years.

Good investing,

Steve.

P.S. Click here to read the whole Fortune story on Heebner.

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.

Sign up today to read more investment ideas from Steve Sjuggerud.

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BEFORE YOU SELL ALL YOUR STOCKS, LOOK AT THIS CHART

Rising inflation... rising foreclosures... rising food prices. There's a lot of "rising" in the wrong places for the average investor... enough to scare 'em out of stocks and into a bomb shelter.

But too many of our favorite "real world" indicators are doing too well right now for us to get spooked. Consider the new all-time high reached by Cummins (CMI) on Monday.

Cummins is the world's largest maker of high-horsepower diesel engines... the kind that power long-haul semis, excavators, oil pumps, bulldozers, cranes, and generators. Cummins' enjoyed a 33% profit increase in the first quarter. Strong non-U.S. sales were the reason for the gain.

The jury is still out on how much the American real estate debacle will hurt the international economy... but Cummins' all-time high indicates the world is still doing a lot of hauling, lifting, drilling, and digging. Until we see a serious breakdown in "real world" indicators like transportation stocks, copper, and Cummins, consider the global economy's glass "half-full."

Cummins Inc.

OAO Gazprom Chief Executive Officer Alexei Miller made two forecasts last week that, if they come true, indicate more pain for consumers and a boon for Russia's government.

Oil will reach $250 a barrel "in the foreseeable future," about 85 percent more than the current price, he said at a strategy briefing in Deauville, France, adding that the market value of state-run Gazprom will triple to $1 trillion as early as 2015.

Gazprom wouldn't be the first to reach the latter milestone.

PetroChina Co. became the world's first trillion-dollar company on Nov. 5, when Class-A shares tripled on their Shanghai trading debut. PetroChina has since plunged 62 percent.

– Bloomberg

In one of the most radical turnabouts in recent market history, expectations for global monetary policy have suddenly shifted to thinking that central banks will start hiking their interest-rate targets to fight inflation – only a couple of months after working full force to counter the credit crisis and weakening economies.

As a result, the short end of the U.S. Treasury market was jolted by a one-week rise in yields the likes of which hasn't been seen since 1987. Indeed, the last time there was a bigger one was back in 1982 in the era of double-digit interest rates.

The futures market for federal funds – the Federal Reserve's key policy rate – is placing strong odds that the U.S. central bank will start raising its target rate as early as the Aug. 5 meeting of the Federal Open Market Committee.

Fed-funds futures also puts a more-than-one-in-five chance that the policy-setting panel will hike its target rate 25 basis points (one-quarter percentage point) at next week's confab – an inconceivable notion only a couple of weeks ago.

– Randall W. Forsyth,
Barron's

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