Mr. Hennessy: The Hennessy Funds are six no-load mutual funds. What makes us unique is that each of our Funds is built on a time-tested, quantitative formula. We manage our Funds with discipline and consistency. We have done extensive back-testing, which means that we've looked at which parameters generate superior returns over time. We've employed those parameters or formulas and put them to work in our mutual funds. Essentially what our firm has done is take emotion out of the investment decision-making process. Every manager out there uses some type of screening through their research departments, but we use 100% quantitative measures.
TWST: How does this apply to the Focus 30 Fund itself?
Mr. Hennessy: The Focus 30 is a mid-cap fund and it follows a strict
quantitative formula. We screen approximately 9,700 different companies. The
first screen is to make sure that the market capitalization is between 1 and
10 billion. The second screen is to make sure that there are no ADRs or stocks
that are less than 5 per share. From there we look for companies with a price
to sales ratio of below 1.5. We are not going to pay more than a 1.5 for 1
sales. Then we screen for companies with earnings higher than the previous year.
And the final screen is positive relative strength over three-, six- and 12-
month periods. Then we buy the 30 companies, in equal dollar amounts, with the
best relative strength over a 12 month period, hold them for approximately a
year and then refresh or rebalance the portfolio.
We started the Focus 30 in September 2003. In 2004, the Fund was up 14% versus
the market being up 11%; in 2005 it was up almost 33% versus the market being up
5%; in 2006 it was up 12% versus the market being up approximately 16%. Since
inception, the Fund has averaged 19.32% annually, for three years 23.36% and one
year is 18.18%, as of September 30. It's up over 14% so far this year.
Tickers included in this excerpt: AKS, DKS, TRA, WRNC
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