Objective and Overview
The Hennessy Cornerstone Growth Fund seeks long-term growth of capital by investing in 50 small cap, growth oriented companies, screening for undervalued stocks with above-average growth potential.
The Hennessy Cornerstone Growth Fund formula marries value with momentum, seeking growth at a reasonable price. Stocks for the portfolio are selected by strict adherence to the following time-tested, quantitative formula:
Market capitalization exceeding $175 million
The lower boundary on market capitalization excludes micro-cap stocks, which can be difficult to trade without affecting their stock price.
Price to sales ratio below 1.5
This value metric helps to uncover relative bargains. The formula chooses sales as its guide because sales figures are more difficult for companies to manipulate than earnings and frequently provide a clearer picture of a company's potential value.
Annual earnings higher than the previous year
While sales may be the best indicator of a company's value, the formula considers improvement in earnings beneficial as an indicator of a company's financial strength.
Positive stock price appreciation, or relative strength, over 3 and 6-month periods
Historically, relative strength has been one of the most influential variables in predicting which stocks will outperform the market.
Select the 50 stocks with the highest 12-month price appreciation
The portfolio is rebalanced once annually, generally in the Winter
Price to sales ratio is a tool for calculating a stock's valuation relative to other companies. It is calculated by dividing a stock's current price by its revenue per share.