Unveiling the Hennessy Mid Cap 30 Fund: A Comprehensive Overview
Hennessy Funds
High-conviction investment strategies matched with an unwavering commitment to always put shareholders first.
The Hennessy Cornerstone Mid Cap 30 Fund, managed by the experienced team at Hennessy Funds, blends value investing, earnings growth, and stock momentum. In a recent podcast, Jay Coulter, the host, discussed the fund's investment strategy, recent rebalance, and key portfolio drivers with the fund’s portfolio managers Ryan C. Kelley, CFA and Chief Investment Officer and Josh Wein, CAIA.
Investment Strategy and Philosophy:
Ryan Kelley outlined the fund's straightforward investment strategy: providing acceptable returns for shareholders over a complete market cycle. The team achieves this by investing exclusively in 30 mid-cap stocks, holding them for a minimum of one year. Annual rebalancing, typically in the fall, minimizes turnover and transaction costs. The selection process combines value investing, earnings growth, and stock momentum, ensuring a strategically diversified portfolio.
Portfolio Composition:
Josh Wein delved into the current composition of the fund, emphasizing its equal-weighted structure with 30 stocks each at about 3%. Industrials dominate at 36% of the fund, followed by energy and consumer discretionary, forming nearly 80% of the entire fund. This strategic sector allocation aligns with the team's outlook on the current economic landscape.
Energy Sector Overweight:
Ryan Kelley shed light on the fund's significant overweight in the energy sector, attributing it to favorable valuations, robust cash flows driven by high oil and gas prices, and companies returning value to shareholders. The team has established criteria, more specifically, companies trading below a 1.5 price to sales ratio - which is true of several energy companies today - and they also track momentum of prior performance over the past few years.? A benefit to the energy sector’s increased cash flow to-date typically means they're returning it to shareholders. We’re seeing many buying back stock, increasing dividends and paying down debt, which provides a stronger balance sheet and overall likely stronger companies.
Mid-Cap Appeal:
Ryan highlighted the attractiveness of mid-cap stocks, with an average market cap of $3.5 billion. Mid-caps, often overlooked, historically outperform large caps and small caps with less volatility. Their combination of established business models and growth potential makes them an appealing investment, especially as large caps show interest in acquiring them.
The Role of Price-to-Sales Ratio:
Josh emphasized the discipline imposed by the fund's one-and-a-half times sales valuation criteria. This metric acts as a filter, eliminating frothy names and ensuring a focus on companies with healthy fundamentals. The "low margin anomaly" was discussed, emphasizing the fund's success in trading lower margin names with strong returns on equity and growth prospects.
领英推荐
Highlighted Holdings:
Recent CNBC highlights by Neil Hennessy included Comfort Systems and Sprouts Farmers Market. Comfort Systems, an HVAC services company, showcased its lower valuation, strong momentum, and potential growth amid the increasing demand for cooling systems. Sprouts Farmers Market, a low-margin grocery business, stood out for its solid returns on equity, dependable growth, and defensive nature, making it resilient in economic slowdowns.
The Hennessy Mid Cap 30 Fund emerges as a compelling option for investors who are seeking an established fund that offers:?
On this episode of Viewpoints by Hennessy, Ryan C. Kelley, CFA, Chief Investment Officer, Portfolio Manager and Josh Wein, CAIA, Portfolio Manager, talk with Jay Coulter about the Hennessy Cornerstone Mid Cap 30 fund. They cover the fund's investment strategy, the most recent rebalance, and highlight fundamental drivers of the portfolio.
Current and future holdings are subject to risk. To obtain fund holdings visit www.hennessyfunds.com.?
Learn more about Hennessy Funds at www.hennessyfunds.com.
For Terms of Use & Disclosures, visit the following links:?