Ken Heebner, the famous hedge fund manager of the $2.25 billion Capital Investment Management Fund, made some intriguing Q4 moves. Due to recently released 13F forms filed with the SEC, we can now see that the fund ramped up its holdings in Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA) but cut back its substantial Micron Technology, Inc. (NASDAQ:MU) position.
Heebner, who is ranked #89 out of 202 hedge funds tracked by financial accountability engine TipRanks, is known for his quirky investment style. “I’ve made the most money when my strategy was something few people agreed with. My huge outperformance occurs when I find one of these very contrarian strategies – something supported by a lot of deep analysis – and implement it in a concentrated way in the portfolio” Heebner explains.
This strategy has been both very successful and very dangerous. For example, he was praised by the industry when, at the start of 2005, he sold homebuilding stocks before they began to decline and moved into energy and commodity companies. On the other end of the scale, Heebner lost badly when the financial crisis seriously damaged the fund’s financial stocks.
In recent times, returns have been more muted. He brought a respectable return for the fund of 24.78% in 2016 although the 3-year annualized return is considerably lower at 12.27%. Consequently, in recent years the fund’s measured performance (58.72%) is above the average hedge fund portfolio (51.7%) but still someway below the S&P 500 (84.2%).
Now let’s examine three of Heebner’s key Q4 moves:
Advanced Micro Devices, Inc.
In Q4, Heebner more than quadrupled the fund’s holding in semiconductor company AMD. Now the fund holds 5.38 million AMD shares worth $61 million. Since the last filing date, the shares have already gained 14.99% in value.
Heebner has been a fan of AMD for many years now: “With AMD you’ve got a company that for most of the past 20 years seemed to exist only because Intel felt it needed a competitor… But new management has come in, and AMD now is ahead of Intel in terms of providing the architecture that users want as well as chips that use less power,” Heebner told Fortune back in 2006.
In fact, AMD shares crashed in 2006 following its purchase of ATI, but prices have since been improving with the launch of much-hyped new products like the Ryzen 7 processor. Perhaps not surprisingly, insiders have been keen to take advantage of the current $13 share price: just after the Ryzen launch AMD owner Mubadala Development sold shares worth $613 million- about one third of the company’s total AMD holding. Shares fell on the news of this insider sale by 6% as investors began to worry that AMD prices have now peaked.
The analyst consensus on the stock on TipRanks is a rather cautious moderate buy (10 buy, 10 hold, 2 sell).
Heebner is also bullish on chipmaker Nvidia – in Q4 he upped the fund’s NVDA holding by 20% to 720,000 shares worth $76.85 million. This is now the fund’s fifth biggest holding at 3% of the total portfolio.
Since the last filing date shares are down 8.38% at $97. To put this in context- share prices exploded from $32 one year ago to peak at $119 on February 19 due to consistent strong demand, earnings growth and AI explorations. In the last month Nvidia has arguably been a victim of its own success. Shares fell following a solid Q4 earnings report as bulls in the market were disappointed that the results were not more remarkable. However given the low trading volumes, it is unlikely that a major selloff is round the corner.
In fact, top Goldman Sachs analyst Toshiya Hari has just reiterated his buy rating with a bullish $130 price target. He is excited about the launch of Nvidia’s flagship new graphics processing unit (GPU), the $699 GTX 1080 Ti which is to be launched next week. “Given the nearly two month delay as well as the lack of any new AMD products for the next 1-3 months, we would expect Nvidia to benefit from what is likely significant pent up demand in the high end” says Hari. The GTX 1080 Ti is expected to have 5% better performance than the GTX 1080.
Micron Technology, Inc.
Heebner decreased the fund’s Micron holding by 14.04% to 3.06 million shares worth $67 million. The move stands opposed to the rest of the market. Since the last filing date share prices have already improved by 17.29%, spiking recently on bullish analyst reports. In particular, Goldman Sachs upgraded MU on Feb 28 saying that there is upside to consensus estimates due to memory price increases led by strength in server DRAM (dynamic random-access memory) during a tight supply environment. AMD has also enjoyed a decrease in competitive pressure from rival Samsung. Six similarly positive reports have been published in the last week.
TipRanks reveals that there is a unanimous analyst buy consensus on Micron stock with no hold or sell ratings published in the last three months. The $29.61 average analyst price target suggests a 15.17% upside potential from the current share price of $25.71.