Stock Fund Is Trouncing the Market

This Stock Fund Is Trouncing the Market—and Trading Just Once a Year

Hennessy Cornerstone Mid Cap 30 Fund has chalked up big returns with winners such as Abercrombie & Fitch and Super Micro Computer.

In a stock market where returns have been increasingly driven by the biggest, flashiest stocks, one fund has beaten the market by going in the opposite direction.

For the past two decades, Hennessy Cornerstone Mid Cap 30 Fund HFMDX has posted returns far outpacing the stock market with an unconventional approach. It’s one that combines a strict, quantitative screen with trading just once a year.

Even just this year, the $1 billion fund is up 21% for the year to date, compared with 2.2% for its category, small-value funds, and 10.5% for the overall stock market as measured by the Morningstar US Market Index

Not only does Hennessy Cornerstone Mid Cap steadfastly stick with winners or losers for a year, the fund has delivered big returns to investors by employing a value tilt in its investing process and primarily investing in small company stocks. Those two factors—value and smaller stocks—have been a combination that has produced lousy returns for years.

Under the hood are stocks that rarely make big headlines but share low price/sales ratios. Its largest two holdings are clothing retailers, the Gap GPS and Abercrombie & Fitch ANF, followed by companies in the decidedly not-flashy industry of heating, ventilation, and air-conditioning systems, such as Comfort Systems USA FIX.

However, Hennessy’s process can lead it to find stocks that turn out to be red-hot and then ride them. The fund bought Super Micro Computer SMCI in October 2022, and investors were able to benefit from the stock’s 400% gain.

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