Portfolio manager for the Hennessy Cornerstone Growth Fund, Ryan Kelly, explains their approach: “We’re not aiming to buy at rock bottom prices or catch stocks on their way up; there’s often still room to grow after that. Our focus is on strict valuation metrics combined with momentum. This strategy sets our fund apart and has contributed to its strong performance over the years.”
The Hennessy Cornerstone Growth Fund distinguishes itself with a disciplined, formula-based strategy that consistently outperforms the S&P 500. Managed by Neil Hennessy, Ryan Kelley, and Joshua Wein, the fund selects approximately 50 stocks from a pool of 5,000 based on criteria such as market size, price-to-sales ratio, earnings growth, and recent stock performance. This method contrasts sharply with conventional index strategies that favor large-cap stocks.
The fund has delivered impressive returns, posting a gain of 66.23% in the past year compared to the S&P 500’s 28.19%. Since its inception in 1996, it has consistently achieved higher average annualized total returns than the index, underscoring the effectiveness of its investment strategy.
A critical component of its approach is the annual rebalancing each winter, where the portfolio undergoes thorough evaluation and adjustments based on predefined metrics. This disciplined practice ensures that only companies meeting stringent performance and valuation criteria remain in the portfolio, irrespective of prevailing market conditions. By concentrating on sectors like industrials, consumer goods, financials, and healthcare and avoiding high-valuation industries such as technology and pharmaceuticals, the fund pursues ’growth at a reasonable price,’ with a focus on maintaining a price-to-sales ratio below 1.5.
Through its meticulous stock selection and disciplined rebalancing, the Hennessy Cornerstone Growth Fund adeptly navigates market volatility, seizing opportunities aligned with its investment philosophy. This method mitigates risks associated with market fluctuations and positions the fund to benefit from sustainable growth and value creation.
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