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Hennessy Funds Co-Portfolio Manager Brian Peery on the strategy for choosing stocks for the fund.
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Minute for you now let's get to a different from the Hennessy focus thirty fund this uses what's called a five point strategy to narrow down thirteen of the best stocks in the market.
Brian -- is the manager he's joining us now from Nevada California to teach you how it's done -- makes the cut and who gets kicked to the -- I'm from California where some of -- pronouncing that right government I've ever heard of -- Where is about yeah it's just about twenty minutes north of their system of -- That's why -- never went north of San Francisco.
Kidding all right Brian period let's talk about how you pick the thirty names that are in the fund before we get to the fund and I want to let our viewers know.
One of his picks is up more than 60% over the past year and this is significant certainly because.
Don't you wish you had listened to Brian back then so let's get to how you first pick -- stocks.
OK so what we did as we start with the realm of approximately 101000 public companies and we have to Whittle it down from there so the first thing we do is we eliminate anything with a market cap outside of one billion attend -- we're looking at.
True mid cap names.
And then we eliminate all the ADR so were only looking at domestic companies.
The next step that we do.
Is we're looking forward which is our valuation screens this price to sales less than one point five which just means who we won't pay more than a dollar and a half for a dollar and staff cuts.
Acts like a quick point about that it.
I'm I'm assuming -- -- -- price to sales because sales numbers are harder to manipulate -- earnings numbers you know -- folks companies can that engineer better earnings numbers.
By tweaking all kinds of -- -- -- correct.
Absolutely I mean -- but you're -- sales numbers are your sales number unless you're gonna cook the books and its -- You know that they are what they are.
I'm which is why we really like those numbers.
But we do look at earnings so when we look at -- earnings we're looking.
Rather than it quarter to quarter we're looking over a year's time frame and we want to know that.
That growth in the revenue line is actually being transferred to the shareholders in the form of earnings were looking for higher -- just one year out.
And you rebalance only one time for -- usually in the fall now we want to know what you're picking right now and let's start with Ross Stores.
Ross Stores is the one that I just mentioned about 69%.
Of the upside over the past year how long have you -- it.
We've -- it.
Her over about it.
Two years now I think.
-- -- -- -- Yeah you know it's it's it's one of those stocks that we continue to love and the numbers keep coming in and they were there doing fantastic same source sales have been phenomenal.
You know that whole kind of low end retailers doing exceptionally well as the consumer is kind of trading down and -- -- -- keep the quality products.
They're looking for that value component in -- Ross Stores seems to be delivering you know every month every quarter show.
01 -- your biggest weighting looks and let's get your second one.
And it's not exactly the same thing but Family -- is the same sort of company that appeals to a consumer -- looking for a better bargains.
Right now.
This is you know this is a great little company that's doing exceptionally well.
You know they're they're the low income player -- if -- You know gas prices have come down so we're looking about this kind of -- a great situation where.
You know they they.
The consumer who's on that kind of low and now has a little more discretionary income and you know you can -- -- Family Dollar pick up everything from you know one to ten dollar items.
And people are doing mounted to kind of they're shopping experience.
Brian -- wanna get your last -- quickly to Sorrell corpus is refining and marketing of but petroleum products and this one up about 8% over the past year but it's a cheap stock IC PE of around six to seven.
That's exactly right you know when they just won a 300 million dollar department of defense contract they're they're cash flows and her improving.
-- they -- the dividend a little bit while a little while ago but you know hopefully that that once thin margins have been proven that ending cash flows improve.
That may get reinstituted -- love to see that we always think the dividends are great for shareholders and you know from valuation perspective this one certainly looks -- in the in the -- Bryant's return over the past three years 21%.
To again it's terrific to have you I -- I want to throw this question I want you to come back and answer at the next on that you're here.
The biggest mistake you see investors making.
Think about that will bring -- -- back because he seems like the kind of guy was a good answer for that that we can all learn from him thanks frank good to see things lists hundreds at any time fronts with the Hennessy funds closing.
