Navigating Markets with Hennessy Funds' Ryan Kelley
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This is Barron's Live. Each week, we bring you live conversations from our newsrooms about what's moving the market right now. On this podcast, we take you inside those conversations, the stories, the ideas, and the stocks to watch so you can invest smarter. Now, let's dial in.

Hello, everyone, and welcome to Barron's Live, our weekly webcast and podcast. I'm Lauren Rublin, Senior Managing Editor at Barron's. Thanks for joining us for an update on the markets, investing, and stocks in the news. My guests this week are Barron's Deputy Editor, Ben Levison, and Ryan Kelly, Chief Investment Officer and a Portfolio Manager at Hennessy Funds.

Ryan is one of the managers of the five-star rated Hennessy Cornerstone Mid-Cap 30 Fund. The ticker is HFMDX. The fund rebalances its holdings annually and just completed the process. We'll be talking about that and a whole lot more, and we'll answer your questions toward the end of the call. So with that, let's welcome Ryan and Ben. Thank you both for joining Barron's Live today. Thanks, Lauren. Glad to be here. Yes, thanks for having me.

Fantastic. Ryan, I'm going to start with you today. Many of our listeners might not be familiar with Hennessy, not to mention the cornerstone MidCap 30. So let's start there. Tell me what makes Hennessy unique, what your investment process is and how you approach the market. Sure. So Hennessy funds, we've been around since 1989. So been quite some time. We have actually a fund that's as old as that as well, our Hennessy gas utility fund.

We run about 5 billion in assets under management. We have 16 different mutual funds and one ETF.

We cover different style boxes, most of them, most of the normal small, medium, large. And we have some specialty funds as well. We have two funds that focus primarily on financials. We have two that focus on Japan. And we have three that are in the energy space, one on energy, one on MLPs, and one for utilities, the one that I mentioned.

So we take a very long-term view of investing. We've been around for a long time. A lot of our funds, they're all actively managed. They're all long only. They're all very sort of what you call plain vanilla mutual funds. But we have obviously various managers, both internally and externally, that run these funds.

And we look to follow a very repeatable investment process, one that's consistent, one that actually can outlast portfolio managers. You know, I came onto the team about 12 years ago, but some of these funds that I work on are much longer than that.

And one of the funds you mentioned, the Hennessy Cornerstone Mid-Cap 30 Fund, this is one of our flagship funds. It's really representative how we try to invest. And we use a formula approach

We want to make sure that we're doing the same thing year in and year out. We want our shareholders to know how we do that. We publish our formula literally on our website, in all of our documents, on our fact sheets. It's everywhere for investors to see.

Can you give us a shorthand version of the formula? Sure. For the MidCap 30 Fund, the idea is that we're trying to combine momentum with valuation and earnings growth to come up with 30 stocks that we think are the best in the space. So think of the process as a giant funnel. You start with 5,000 companies that are publicly traded out there.

You then cut out companies that are ADRs. We want to only own US companies. Then we're looking for market caps between one and 10 billion. So it's a pretty short list at that point in time, about 500. Then the real part of the formula is when we combine metrics, some fundamental metrics that we look at. We're looking for price to sales of less than 1.5 times. We're looking for annual earnings higher this year than last year.

and we're looking for stocks that have basically momentum behind them. They have positive stock price appreciation over the last three and six months. We then take whatever's left, and there's usually about 100 or 125, and we rank them by the highest one-year price appreciation. So we really want those stocks that have done very well in the last year. And we buy the top 30 of those stocks in the portfolio. So you don't worry that past might not be prologue?

We don't. And the reason is, is that the way that, you know, it really kind of works nicely is that we're buying, you know, pretty deep value companies price to sales ratios below 1.5 times. That's only about one third of the entire market that fits that bill.

But in order to make sure that we're not buying a sort of a company that's out of favor, that's a falling knife essentially, is we wanna make sure that we are buying a stock that's already turned. It already has some nice momentum behind it. We ended up finding some turnaround stories from time to time. An example of that was Crocs. We owned Crocs when really a lot of people really cared about the stock anymore and it did very well for us.

And by making sure that we see the three and six month and 12 month price, positive price appreciation, we're hopefully buying something after it's turned and not something that's still on its way down. Got it. I want to ask you a broader question. This has been a large cap oriented bull market. What is the case for mid cap investing at this point?

Sure. Well, I think, you know, we really like mid cap exposure over the long period of time. It is at this point in time, its valuations are much more attractive in the mid cap space than in large cap and small.

These are companies that usually are old enough so that they have a nice track record behind them. They usually have multiple business lines. A lot of them are primarily in the mid cap space, domestically focused, and yet they're large enough that they can make a difference in an acquisition. So they're attractive to some of the mega cap and large cap companies if those companies are looking to continue to buy.

So you kind of put all those together, valuation, where they are, how long they've been around, those type of metrics. And we think there's just a lot of good opportunity there in the mid cap space. Do you find that by going to mid cap, you avoid some of the concentration in financials and like small biotechs that you might get in like a Russell 2000 kind of fund?

Yeah, absolutely. That's definitely part of it. Part of, you make a good point, we don't actually own any healthcare right now in the fund. And that's primarily because of the way we're looking at price to sales. You don't really get a lot of cheaper healthcare companies on a price to sales basis. But certainly in the mid cap space, it's a much different profile than large caps. Large caps right now, as everybody knows, is dominated by the Magnificent Seven.

There are, you know, that's it's 50% of the port of certain portfolios. Tech is 32% of the S&P 500. Well, in the mid cap and small cap, if you're looking at the Russells,

Only 12% is tech, so it's a much more diversified space. So you're gonna get more consumer discretionary, more industrials, those are the two largest in the mid cap space. And you're gonna naturally get less of say technology and as you mentioned, biotech and healthcare.

So let's talk about the even bigger picture at this point. The stock market is up sharply this year. In fact, it's doing better than almost anyone expected. But stocks have started to churn in the past week or so. As Ben and I were saying, it feels like a sell-off of some magnitude, but it really isn't. However, investors are worried about a possible resurgence of inflation, slowing growth, fewer rate cuts, geopolitics. You can name your worry. So Ryan, what is your market outlook as we head toward 2025?

Sure. Well, we think that we have a subdued outlook on the market into 2025. A lot of that is due to the fact that we are at pretty lofty valuations across many different companies. We think that there's still some good fundamentals out there that's going to help.

As far as a strong labor market, wage growth, a lot of health of the economy, good growth in GDP, not necessarily significant, but still very nice.

And so we're looking, you know, we actually just had our annual Hennessy CIO roundtable just last week in which we got together 22 different investment professionals, 14 different portfolio managers, Neil Hennessy, our chief market strategist. And we're looking for, you know, somewhere, you know, flat up 10 percent potentially next year in the S&P 500. That was the consensus we came up with.

That's a pretty broad consensus. It's a pretty broad consensus. Neil, our chief market strategist, has about a 5% upside to his price target for the Dow. He likes to look at the Dow instead of the S&P. But that kind of shows you where we are as a firm right now.

I know that you have two funds in Japan, and I'm curious if you're kind of zero to 10 here, what's the forecast for Japan? The market's been getting a lot of attention this year. It has. It has. In Japan, we've actually had these funds for over a decade, quite a long period of time.

And that is it is a fund that's sub advised. So those managers are from Japan themselves. It's called Spark Sparks Asset Management. They're on the ground. They know the market exceptionally well. They are relatively bullish on the Japanese market. There's a lot of interesting things going on over there, which sound different to us over here in that they're very excited about inflation

that may be one and a half to 2%. It's a different market there. They haven't had inflation for years. People have been holding onto their cash and not investing it and not spending it. So when you see inflation over in Japan, that's actually a good sign,

Versus here, we don't want too much inflation. So that's one really excellent point. Another one is that there's just a lot of change right now going on with corporate governance over there. In a way, shareholders have not been as important over in Japan and maximizing shareholder returns has not been quite as important.

but even from the actual stock exchange over in Japan recently, they want companies to essentially invest in themselves, to increase ROEs, to buy back shares, which has not been a huge factor over there. So they're trying to really encourage companies to do things to improve the bottom line and to essentially increase shareholder value. So

It is a very interesting place to be investing right now. And again, it's a company that it's our country that's very rich when it comes down to they have 17 trillion in financial assets.

But seven and a half trillion of that is sitting in banks earning close to nothing. So there is an opportunity over time. And this is a longer term story. But over time, as people start investing more, which is certainly being encouraged more now than it was 10 years ago. And do you think they'll stick with the domestic market? That's a good question. There is there is a whole lot of

There is investing over there, of course. They do look outside. But I think that there's just enough interest now in the domestic market. There is a mechanism now for people to invest over there, which is it hasn't been as easy for individuals to do so in the past. And so I think that's all going to help going forward. It's an interesting situation. A lot of dry powder, as we say in America. Yeah.

We're going to come back to some of the stocks you like, Ryan, and some of the sectors you like, but I want to turn things over to Ben now. Let's get back to the U.S. We are about to hear from NVIDIA, slated to report earnings on Wednesday. This makes it a high anxiety week on Wall Street because many people consider NVIDIA not just the most important artificial intelligence play, but the most important stock in the market, given how well it's done. And

They think that the future of the market often depends on the outlook NVIDIA gives. I don't know if that's true or not, Ben. You can fill us in. But let's start with what Wall Street's expecting from NVIDIA's earnings. Well, the earnings are very straightforward. In expecting $0.75 a share, that'd be up from $0.40 a year ago. And on sales of $0.33 a billion and change, that's going to be up.

That would be up from about $18.1 billion. So again, fantastic growth from Nvidia still. It's why the stock has done so well. And the stock really, I mean, it still has done incredibly well despite all these concerns that are out there. It's up 187% this year through Friday's close, up 14%, down a little bit today, around a little less than 2% today.

But when you listen to people talking about it right now, there's a lot of worry. What I find fun is looking at the difference between the analysts who cover the stock for the big firms that we all know the names of versus analysts at other places that might not be so consensus driven. And then versus folks who aren't your typical analysts, strategists or they're even desk analysts. Everyone has an interest. Everybody's watching these things.

and they all have different views. So the analysts are all sitting here looking at the numbers and say, hey, NVIDIA is going to hit these numbers. But when you start, there's still this worry about the guidance going forward. For one, they're expecting to guide to about $36 billion for fourth quarter revenue. But there's something called a whisper number, and that's probably around $39 billion.

And that's a big number. And there's worries about that being unsurpassable. And there's also these worries about

We had a report in the information over the weekend just about the new chips that Nvidia is building called Blackwell. There's always been a lot of worries about these chips. They've been delayed in launching them, and now there are reports that they're overheating. And so the stock's down a little today, but we really don't know if there's any truth to that or not.

What quite is going on? And so you have a Mizuho desk analyst. Basically, they sit with the traders and they provide commentaries, but saying that they think the revenue guide is really going to be a sign of, you know, if they can beat these numbers that are out there, a sign that there aren't any overheating issues, but they can. Might be a sign that there is. So there's just a lot at stake for the company right now, especially because it's only about 2% or 3% off its all-time high.

So what's at stake for the market? What do you expect to happen if NVIDIA beats its numbers? What do you expect to happen if the company disappoints?

Well, I think if it beats, it's going to be this moment where you've had a lot of things sell off because of concerns about NVIDIA and the AI trade, especially within the chip sector. And so if NVIDIA can beat and beat kind of these expectations as well, I think that'll be very helpful. There are a lot of folks who have looked at the sell-off in chip stocks besides NVIDIA and think that it's overdone and that people should be buying ahead of NVIDIA's print.

And if it does, you know, if it comes out with great numbers, those chips are going to bounce. And, you know, technology stocks, which have also been underperforming a little bit, should bounce as well. The flip side of that is that so much is riding on NVIDIA. You know, it's sort of a sign that, you know, it's all tied up in this ecosystem with most of the Magnificent Seven stocks who are using its chips.

And it's kind of become the stand in for the future of AI and its ability to drive earnings for not just NVIDIA, but for other companies as well. And if that looks like it's petering out, that could be a big problem. And so you do have people who are worrying that if NVIDIA disappoints in a big way, that that

That's going to be the catalyst for people to start taking money out of the tech stocks that have done so well and put them into other sectors. Could be good for mid-cap stocks. It could. Not for the S&P 500 overall, though. No, we shall see. All right, let's look at some retailers reporting this week.

We heard from Home Depot last week. Its earnings were a bit of a letdown, but rival Lowe's is reporting on Tuesday. Are we going to get better news from Lowe's, do you think? No, some people think so. You know, the stock has really been, you know, not...

going anywhere for you know a while it's a kind of a sideways trade um though it is you know it is up near 52 week high high within this kind of range that it's been trading in um and you know it's going to get a boost like home depot from some of the hurricane uh related um issues and people are gonna be buying stuff that there's also some takeaways from that

But the real hope is that some of the DIY stuff, the do-it-yourselfers are going to come back in and that they're going, because it's a big group for loads. It's about 75% of the business versus 50% for Home Depot. So that DIY business has to do well. But there's also hope, at least coming from B of A's analysts, that you're also going to see strong from the pro side, those contractors and things like that.

And so Lowe's, you know, I think here the setup is pretty decent. The stock is up about 21% this year. You did have seen a little bit of dip in earnings to 282. That would be down from $3.06. But if you see some margin improvement, which is what B of A is hoping for, you could get a nice pop in the stock.

What about Walmart and Target? We're going to hear from Walmart on Tuesday and Target on Wednesday. Walmart has done a spectacular job. Of course, it's the more expensive of the two.

What do you see for earnings for Walmart? And do you think Target has a chance of catching up or at least getting back to where it was? Well, Walmart is I mean, it's crazy to think about it, but it's almost it's a thirty one and a half times earnings. And you put that in perspective, you know, it's not as expensive Costco, which I think is over 50 times at this point.

But it's only a little bit below Nvidia at 35.3 times. It's about four points below that. This is not an everyday low price. No, this is not at all. And a lot of the excitement here has been not just about Walmart doing what it always does, which is it has low prices, has very good margins, keeps taking market share.

But that all these other things that it's doing, especially within the tech space, are really starting to pay off and are going to turn into earnings. There are some worries out there. There's a firm called Quo Vadis, which is run by an analyst who used to be at these sell-side firms. Now he has his own shop.

And he's a little worried about the company making numbers. He thinks that you're looking more at 51 to 52 cents instead of the 53 that Wall Street is...

is hoping for um but uh you know there's there are again some worries about this valuation here um that uh you know even if you start to incorporate that tech stuff into it you know the earnings have to grow much faster to really have the stock be worth what it's trading at now um you know there are others who say no don't worry about it walmart's just so good it deserves to have this uh um this pe that it does but um there's also that other side it's like wait a minute

can this stock get too expensive? And that's where kind of Target comes in because Target just has been, you know, it just, the pandemic, it really didn't handle very well. And you had inventory problems and all kinds of things, but Target's actually started to turn around a little bit. It's only up 6.8% this year, but earnings are supposed to grow to $2.30 this quarter from $2.10 this

and that would be on sales of expected to be at 25.9 billion that'd be up a little bit from 25.4 um and again here the hope is that same-store sales are starting to improve they're expected to drop but uh that's um by about three percent but that would be much better than last quarter's uh 4.9 percent um

or last year's 4.9%. And there's also, again, hope for margin expansion. And the stock trades at only 14 times P/E. And that, to some people, is a reason to get into the stock, especially if it's really starting to find its footing.

as it goes ahead. So we'll see what happens. You know, Ryan was talking about sticking with your winners and or going with stocks that have momentum. And Target, I'm not sure is quite there yet, but it's at that point where maybe this is what's starting to build.

As you were talking about Walmart, I was thinking maybe we should talk about the Magnificent Eight. Very true. All right. We'll see. We'll see what happens there. Just very quickly, Ben, because we have a lot more to get through. I want to talk about John Deere. It reports on Thursday. It was a market darling in recent years. Its technology revolutionized farm equipment and farming. But this year, the stock has been stuck in the mud.

What can we expect from earnings? And will it get out of the mud? It's really been stuck in the mud for about two and a half years at this point. Completely range bound, bouncing up and down. You know, I was reading again from Raymond James. They were talking about how the near term is bearish, that you look at inventories and that's a problem. Production from farms isn't great. Pricing is an issue. And, you know, they're actually...

see some issues this quarter that could be a problem. On the other hand, they note that fund managers are pretty negative on the stock heading into the print, and they do see things getting better next year. And I think that's what it's going to be. What I find

appealing about Deere as a long-term play is that we are seeing it bouncing around in a range. It's not that it's dropping. It doesn't have a downtrend. It's just kind of stuck. And as these issues work themselves out, perhaps that's the sign that it's ready to go because it does have this technological advantage. I mean, it still is a company that really has some great things going on. It just needs to work through some of these issues that I think have lingered from COVID.

That makes sense to me. All right, let's move on and talk about a couple of stocks that Ryan likes. Ryan, I took a look at the top 10 in your portfolio since the rebalancing. And I'll start with Peloton, the exercise bike maker. This is a company that was really the star of COVID as everybody...

bought bikes to work out at home, but Peloton has lost its magic since then, I suppose due to a combination of internal missteps and external factors. And the stock, which was once around 160 a share is now around $7.50. So what is Peloton doing as one of your top holdings and what are your expectations?

Sure. And before we jump into individual names, let me just tell you a couple of things about this fund. It is about 80% of performance over time comes from the individual stocks that we hold in the fund and not necessarily from being in the right sector at the right time. So we're not trying to make big giant sector bets, trying to figure out what the next big industry is to move.

And rather, we're just letting the fundamentals of the companies really dictate what we own. So this is a classic example of that. It is. Yeah, I was thinking all the more reason to talk about Pelotona. Yeah, exactly. It has obviously fallen from way from its highs, and it's been through a lot of more recent disruptions.

But we, you know, when we started the rebalance this year, it was trading at about 0.7 times price to sales, which is one of the cheapest ones that we added into the portfolio. We were buying it at around the 5, 550 level, give or take. And since that time, it's now up, you know, about say about 25, 26%.

And it's now a 4% holding on our fund. So we add all of these stocks. We don't have necessarily favorites in that we're buying one bigger than others, but we have rather we add all 30 stocks in at a 3.3% position when all is said and done during the rebalance. And since we just rebalanced it, it's now at a 4.1% position in the fund, which makes it one of the top 10.

Again, this is just a company that has seen more recent momentum over the last three, six and 12 months. And it was trading at a nice attractive price to sales ratio.

I'm glad you're asking about this because this is the type of story as well that we end up finding in this fund from time to time. And that's companies that are trading at pretty low valuations that are turnaround stories. And I've mentioned Crocs earlier. Restoration Hardware was a great example of that. We owned that in the past as well. And we bought it when nobody was going to stores, apparently. That's what everybody thought.

And they went through a transformation where they're really developed their online presence as well as their stores got more robust. It became a destination type thing. So and then it's happened for full sectors, too. We were buying a whole lot of energy.

when oil was much lower, because again, we're looking for really deep value on a price to sales ratio and then energy turned and we ended up doing very well for our shareholders as well. So this Peloton, I don't have an insight as to why it's going to completely do differently than the past, but rather this is more us trusting our process and in a very disciplined way, continuing forward year after year.

So your process also turned up a couple of restaurant stocks. You own Brinker International and Cheesecake Factory in the top 10. What is it about these stocks that dovetailed with the formula? And if you have any insights about the activist campaign at Cheesecake, we'd love to hear it. Sure. Again, given the way that this fund is run, it is diverse.

Just that these have fit the criteria we're looking for. And, you know, with with when restaurants, you might say, well, that's, you know, it's a it's a tougher place to invest. It's a tougher place to know how things are going. And certainly with what's going on over at Cheesecake.

There's more to it, but I think for us, it's really just continuing to stick with what's worked in the past. And both of those stocks have actually done pretty well since we added them, which is only about a month ago. So this fund, the current portfolio is very new, but those are ones that are starting out of the box much better than the others.

All right. We had a question from Jason that I thought was interesting. He wants to know, how do you presently define mid-cap and will you continue to hold the stock if it appreciates to large cap or depreciates to small cap? That's a great question. Our formula uses one to 10 billion in market cap.

That is on the very small side of mid cap these days, but it has worked for us over many years. If we buy a stock, we always buy the stock when it's still within that range. If it goes up throughout the year, we hold it. And in fact, as new money comes in, if we're lucky enough to be getting inflows, we will buy all of those 30 stocks that we own, but we'll buy them in

However, you know, in proportion to how big they are. So to get to a prime example, we actually owned last year, meaning from 2022 to 2023, we owned Supermicrocomputer. And as anybody who's watched that stock saw, it had some phenomenal off the charts returns.

Until. What's that? I said until. Until. We sold it last year during the rebalance, which was October of 2023. And we sold it and the stock still went up for a while until April or so.

And then of course, we've all seen what's happened now until. But getting back to the question, that stock at one point became a 12% or 13% position in the fund because it really skyrocketed. It went way above the 10 billion market cap range, but we held it and we always hold the stock until the next annual rebalance.

because we really want to make sure that a company that has momentum and that's growing and it's doing well, we want to stick with it. At the rebalance, we may end up with a lot of times 25 to 28 brand new names out of the 30. So we have some keepers that usually stay in from year to year, say two to five of them. But there's always a pretty big rebalance and reconstitution that happens once a year. So what do you do all year before the rebalance?

- We run many different funds as far as my particular job, I actually run 10 different funds that are similar in this type of style. And when money comes in and money comes out, we obviously invest more into the stocks we own or have to liquidate some of them to meet redemptions. But for the most part, we really wanna just let the portfolio sit for the entire year until we do the next rebalance.

We had a question from Sumaya, more of a macro question. How do you see macroeconomic factors such as interest rate shifts or inflation trends influencing sector performance and stock selection?

Does that play a role at all? It doesn't play a role in how we run this fund. It really is. It's not part of our decision making process. And that has helped at times. And then also at times, maybe we've missed things. But, you know, when you're sticking to just fundamentals of the individual companies, and this is a very, you know, a quantitative approach, I would say,

And this is something that has worked over 21 years time. This fund is 21 years old. And I was just looking at it today. It actually has better performance than the S&P over 21 years, over 15 years, 10 years, five years, three years, one year, all those different standard numbers.

timeframes that you might look at. And it's done so by just sticking to the same, almost in some ways, people would say a formula that brings in companies that are less well known, that are out of favor, that maybe turn in a corner, but people, you know, you're not really getting a whole lot of investor interest at that time.

But it just happens sort of year in and year out. And honestly, we as the portfolio managers, we think of ourselves as stewards of the process. So we're not trying to look at all the news flow and find the next great industry and try to follow what's happening in inflation. Those are all very important for investing. But in this particular fund and this style of fund, it's another way of seeing how investing can be done without getting too overcomplicated.

And do you find that as you look at the fund at, let's say, the end of a year, do you ever look at it and say, oh, it picked up on a theme that is now starting to come into play that you might not have been aware of at the start of the year? Oh,

Oh, absolutely. We see that a lot, actually. And that's the flip side of all my talk about individual stock selection. We then also see, which is where the market works, is things do move in tandem. You know, when you look at individual sectors or industries, etc.,

And energy was a great example of that. We were buying a lot of energy stocks into the fund before, you know, this is five, six years ago before we had that spike in commodity oil prices. And so that really helped the fund at that point in time. Last year, for instance, interesting story, as we rebalanced and got rid of super microcomputers,

which had gone up significantly and been a huge, I think about 25% of the overall contribution to the fund's performance. And we replaced it, two of the biggest holdings right off the bat were a couple of retailers, Abercrombie and Fitch and The Gap. And most people said, we actually had an investor who really questioned us on that and said, why are you doing this? And I said, well, because we're following the formula. Well, guess what?

After or that sort of holiday season was excellent for Abercrombie & Fitch and the Gap. The stocks ended up being our two top performers for the year, along with one other called Modine Manufacturing. And that was a situation where you might not have said we want to go all in on retail.

And yet it ended up working and especially that type of retail. So, you know, apparel, but it ended up working very well. So, Ben, it does happen quite a lot, actually, where the themes play out and you see it in a few different stocks within the portfolio. I like the combination of valuation and momentum.

That's an interesting strategy and not something a lot of people follow. Yeah. And it's also interesting because the valuation metric that we use is very different from a lot of the others out there. I'm not sure if you've really had many guests on your show who say that we focus on price to sales.

No, but sales are harder to manipulate than earnings. Exactly. And so we like that number because it is less manipulated. There's a lot less fattening

factors, fewer factors that hit it as it goes down to the bottom line. And it's a little bit more predictable. Obviously, there's seasonal factors and whatnot, depending on the type of industry. But it also, while it's a somewhat of a blunt instrument, it also allows us to compare across many different industries and many different sectors. And ultimately, I don't think it would work quite as well if that's the only thing we're looking at. But because we're looking at

a low price to sales with momentum as well. I think that's where you really end up getting some interesting stories, turnaround stories, good companies that are the backbone of industry in the United States. You don't hear of a whole lot. We owned a couple of, we literally owned two stocks last year that make buses and they did well for us. Bluebird. Didn't even know there were two. Exactly. So Bluebird makes buses and yet they got

a really good boost because they're also starting to convert to EV, to electric buses. So all of a sudden this stock we owned ended up being one of the better performers as well because of other things going on in the overall economy.

So Kenneth asked something I've been wondering. Do all your funds have a strong momentum bent? They do not. Two of our funds do, and that's the Hennessy Cornerstone, the MidCap 30 Fund, which we're talking about right now. And the other one is the Cornerstone Growth Fund.

Those two have that component. Some of the other funds we have are in different categories, you know, in large cap, and they may have they have very different formulas. And these were all sort of this is all based on back testing that was done when the funds were established. And some of them were are decades old.

and looking at sort of three decades or four decades worth of performance for that particular asset class and trying to figure out what really worked over time.

And that's how we came up with the formulas. We also have, just to be clear, though, we do have plenty of our funds in our company, the financial funds, the energy funds, which are based more on what you'd think of as deeper, fundamental, company-specific analysis.

Our financial funds are run by Dave Ellison, who's been doing it since 1984. He used to work with Peter Lynch over at Fidelity. Wow. I've spoken to Dave. Oh, yeah. Great. Excellent. Yeah. And then we have energy funds that our portfolio manager gets really deep in there. He lives in Texas and he has a lot of feelers out to know what's going on at any given time. So there are different styles within our company.

for sure. But these cornerstone funds are the ones that follow this more strict formula based approach. Interesting approach. All right. I want to reserve the last question for Ben. And Ben, you have about a minute and a half for a huge question. Robab asks or notes that health care stocks are under a new administration or soon will be. In fact, the whole country will soon be under a new administration. What does that mean for the stocks?

Well, the market right now has been kind of taking your shoot first, ask questions later kind of attack towards it. Healthcare just generally has been a terrible place to be. Really, they peaked in September, it looks like, and just been downhill ever since. And since the election, they've taken another leg down. And I think a lot of this is about concerns around RFK.

and what it will mean with him as really health secretary, what that's going to mean for the healthcare companies. I think at this point, you're starting to see some interesting opportunities show up. There may be a little bit more downside. But, you know, today, Moderna has been one of these stocks that's just gotten crushed. And for a lot of reasons, some have nothing to do with the election, but it's taken even another like lower position.

since then. And it got upgraded today by HSBC and partially just because it's getting hit so hard. I think at this point it has a cash position that is about equal to half the valuation of the company.

So you're seeing a lot of these stocks just get hit in such a hard way that without actually knowing what policies are going to be under President Trump, that I think you're starting to see some attractive valuations pop up. So I think it's a sector that's worth watching for potential bounces.

Well, we did our healthcare roundtable in September and then the stocks went over a cliff. So I agree with you. It's time to pay attention to potential bargains. And with that, we need to call it a day. I want to thank you, Ryan, and thank you, Ben, both for your wonderful commentary today. And thank you to our listeners for tuning in. And thanks for your good questions.

Next week on Barron's Live, Ben and I will be speaking with an in-house investment authority. That's Barron's Senior Editor, Andrew Barry.

Andrew is our resident Buffetologist. That's what we call him. He writes about Berkshire Hathaway almost every day, and he knows the company inside out, backward and forward. In fact, there is almost nothing he hasn't written about in his lengthy and illustrious Barron's career. We spend a lot of time, the three of us, talking every day about stocks, and we'll bring you all in on the conversation on next week's Barron's Live.

Thanks again, Ryan, for joining us today. And thanks, Ben, as always. Thanks to our listeners. Stay well, everyone, and have a good week.