This week’s John Hussman Market Commentary contains an economic lesson on Monetary Policy. The economics professor-turned mutual fund manager cited Economist Ludwig Von Mises extensively to prove the fallacy of the current Fed policy of easy credit.
As a mutual fund pursing a long/long strategy, the Hussman Strategic Growth has not been doing very well lately. Morningstar shows that the fund last 3.73 percent during the past year; -2.85% and -0.51% for the past 3 and five years. Although he beat the market benchmark S&P 500 index, Hussman laments the fact he has not been able to deliver positive return to his investors. But If you go back to ten years, the fund has returned 5.94%, outshining about 88% of the mutual funds in the category.
While recognizing the lack of positive return, Hussman offered the following defense on how his performance should be measured:
In other words, investors in Hussman Strategic Growth Fund should expect better days to come as Hussman sees “the potential for the recent advance to be corrected by a future bear market”. Indeed, although he and his team recently modified their investment decision making tools so it might allow them to be more constructive in taking risks, Hussman’s view towards the stock market is so negative that he will refuse to take any risk at this time. His fund is fully hedged. This is his assessment to the current stock market:
Read the full text of his weekly market commentary here.
Normally, my weekly introduction to Hussman’s market commentary will stop here. But this week, Hussman talked about his stock selection and the fact that his unhedged positions has outperformed over 700 basis points annually over S&P 500:
GuruFocus tracks Hussman’s stock portfolio. Here is a list of high quality stocks that he held as of September 30, 2010:
Cognizant Technology Solutions Corp. (CTSH, Financial)
Cognizant Technology Solutions delivers high-quality, cost-effective, full life cycle solutions to complex software development and maintenance problems that companies face as they transition to e-business. Cognizant Technology Solutions Corp. has a market cap of $22.79 billion; its shares were traded at around $75.09 with a P/E ratio of 34.44 and P/S ratio of 6.95. Cognizant Technology Solutions Corp. had an annual average earning growth of 40.3% over the past 10 years. GuruFocus rated Cognizant Technology Solutions Corp. the business predictability rank of 5-star.
John Hussman owns 650,000 shares as of 09/30/2010.
C.R. Bard Inc. (BCR, Financial)
C.R. Bard, Inc. is one of the worldwide leaders in developing, manufacturing, and supplying healthcare products that focus on Vascular, Urology, and Oncology Disease States. C.r. Bard Inc. has a market cap of $8.45 billion; its shares were traded at around $90.92 with a P/E ratio of 16.65 and P/S ratio of 3.33. The dividend yield of C.r. Bard Inc. stocks is 0.79%. C.r. Bard Inc. had an annual average earning growth of 15.7% over the past 10 years. GuruFocus rated C.r. Bard Inc. the business predictability rank of 5-star.
John Hussman owns 800,000 shares as of 09/30/2010.
Novartis AG (NVS, Financial)
Novartis AG is committed to improving health and well-being through innovative products and services. Novartis Ag has a market cap of $130.62 billion; its shares were traded at around $57.05 with a P/E ratio of 11.36 and P/S ratio of 2.95. The dividend yield of Novartis Ag stocks is 2.9%. Novartis Ag had an annual average earning growth of 14.2% over the past 10 years. GuruFocus rated Novartis Ag the business predictability rank of 5-star.
John Hussman owns 1,003,500 shares as of 09/30/2010.
FactSet Research Systems Inc. (FDS, Financial)
FactSet Research Systems Inc. supplies global economic and financial data to analysts, investment bankers and other financial professionals. Factset Research Systems Inc. has a market cap of $4.38 billion; its shares were traded at around $94.39 with a P/E ratio of 29.5 and P/S ratio of 6.83. The dividend yield of Factset Research Systems Inc. stocks is 0.97%. Factset Research Systems Inc. had an annual average earning growth of 19.4% over the past 10 years. GuruFocus rated Factset Research Systems Inc. the business predictability rank of 5-star.
John Hussman owns 379,000 shares as of 09/30/2010.
Becton Dickinson and Company (BDX, Financial)
Becton, Dickinson and Co. is engaged principally in the manufacture and sale of a broad line of supplies, devices and systems used by health care professionals, medical research institutions and the general public. Becton Dickinson And Company has a market cap of $18.83 billion; its shares were traded at around $83.23 with a P/E ratio of 16.42 and P/S ratio of 2.55. The dividend yield of Becton Dickinson And Company stocks is 1.97%. Becton Dickinson And Company had an annual average earning growth of 14% over the past 10 years. GuruFocus rated Becton Dickinson And Company the business predictability rank of 5-star.
John Hussman owns 1,000,000 shares as of 09/30/2010.
Check out Hussman’s portfolio by clicking on John Hussman.
As a mutual fund pursing a long/long strategy, the Hussman Strategic Growth has not been doing very well lately. Morningstar shows that the fund last 3.73 percent during the past year; -2.85% and -0.51% for the past 3 and five years. Although he beat the market benchmark S&P 500 index, Hussman laments the fact he has not been able to deliver positive return to his investors. But If you go back to ten years, the fund has returned 5.94%, outshining about 88% of the mutual funds in the category.
While recognizing the lack of positive return, Hussman offered the following defense on how his performance should be measured:
As I've emphasized for more than a decade, a "full market cycle" is taken from the peak of one bull market to the peak of another, or the trough of one bear market to the trough of another. It is inappropriate and misleading to evaluate the performance of a hedged investment strategy from a bear trough to a bull peak, or from a bull peak to a bear trough. For example, the period from the March 2003 market trough to the present is not one full market cycle, but one full cycle plus an uncompleted half - it includes the 2003-2007 bull market, the 2007-2009 bear, and the bull market from 2009 to the present, but leaves out the potential for the recent advance to be corrected by a future bear market. Again, our objective is to outperform the major indices over the completemarket cycle, with smaller periodic losses.
In other words, investors in Hussman Strategic Growth Fund should expect better days to come as Hussman sees “the potential for the recent advance to be corrected by a future bear market”. Indeed, although he and his team recently modified their investment decision making tools so it might allow them to be more constructive in taking risks, Hussman’s view towards the stock market is so negative that he will refuse to take any risk at this time. His fund is fully hedged. This is his assessment to the current stock market:
The stock market continues to be characterized by an overvalued, overbought, overbullish, rising-yields syndrome that has historically proved to be quite negative for stocks. It is urgent to stress here that while overvaluation itself can persist for quarters or even years, the narrower syndrome I have described here has rarely persisted for longer than a few months before resolving into abrupt and typically very steep market losses (a duration of this condition for 6-14 weeks is common). I noted in recent months that we've introduced a broader range of Market Climates, which will allow us to take moderate exposures to market fluctuations more frequently than in recent years. But even on the basis of this richer set of Market Climates, now is not the time. In dozens of subsets of historical data and allowing numerous ways to classify market conditions, we come to the uniform conclusion that market risk is not worth taking, and is in fact quite dangerous to accept, under the present set of conditions.
Read the full text of his weekly market commentary here.
Normally, my weekly introduction to Hussman’s market commentary will stop here. But this week, Hussman talked about his stock selection and the fact that his unhedged positions has outperformed over 700 basis points annually over S&P 500:
On the stock selection front, we've had some "basis risk" recently in that stocks having poor rankings for quality and yield and high rankings for risk have outperformed stocks with the opposite characteristics, but given that our stock selections have outperformed the S&P 500 on a total return basis by more than 700 basis points annually, we're maintaining our discipline there. So, we're comfortable with the stocks we hold, despite the recent exuberance for speculative issues, and we're also comfortable with our hedged position here, given the overvalued, overbought, overbullish, rising-yields syndrome that we presently observe.And in the past weeks, Hussman finally came around. While still insisting the overall market is not very exciting, he agreed with Jeremy Grantham that high quality US stocks offers better prospects for the next couple of years.
GuruFocus tracks Hussman’s stock portfolio. Here is a list of high quality stocks that he held as of September 30, 2010:
Cognizant Technology Solutions Corp. (CTSH, Financial)
Cognizant Technology Solutions delivers high-quality, cost-effective, full life cycle solutions to complex software development and maintenance problems that companies face as they transition to e-business. Cognizant Technology Solutions Corp. has a market cap of $22.79 billion; its shares were traded at around $75.09 with a P/E ratio of 34.44 and P/S ratio of 6.95. Cognizant Technology Solutions Corp. had an annual average earning growth of 40.3% over the past 10 years. GuruFocus rated Cognizant Technology Solutions Corp. the business predictability rank of 5-star.
John Hussman owns 650,000 shares as of 09/30/2010.
C.R. Bard Inc. (BCR, Financial)
C.R. Bard, Inc. is one of the worldwide leaders in developing, manufacturing, and supplying healthcare products that focus on Vascular, Urology, and Oncology Disease States. C.r. Bard Inc. has a market cap of $8.45 billion; its shares were traded at around $90.92 with a P/E ratio of 16.65 and P/S ratio of 3.33. The dividend yield of C.r. Bard Inc. stocks is 0.79%. C.r. Bard Inc. had an annual average earning growth of 15.7% over the past 10 years. GuruFocus rated C.r. Bard Inc. the business predictability rank of 5-star.
John Hussman owns 800,000 shares as of 09/30/2010.
Novartis AG (NVS, Financial)
Novartis AG is committed to improving health and well-being through innovative products and services. Novartis Ag has a market cap of $130.62 billion; its shares were traded at around $57.05 with a P/E ratio of 11.36 and P/S ratio of 2.95. The dividend yield of Novartis Ag stocks is 2.9%. Novartis Ag had an annual average earning growth of 14.2% over the past 10 years. GuruFocus rated Novartis Ag the business predictability rank of 5-star.
John Hussman owns 1,003,500 shares as of 09/30/2010.
FactSet Research Systems Inc. (FDS, Financial)
FactSet Research Systems Inc. supplies global economic and financial data to analysts, investment bankers and other financial professionals. Factset Research Systems Inc. has a market cap of $4.38 billion; its shares were traded at around $94.39 with a P/E ratio of 29.5 and P/S ratio of 6.83. The dividend yield of Factset Research Systems Inc. stocks is 0.97%. Factset Research Systems Inc. had an annual average earning growth of 19.4% over the past 10 years. GuruFocus rated Factset Research Systems Inc. the business predictability rank of 5-star.
John Hussman owns 379,000 shares as of 09/30/2010.
Becton Dickinson and Company (BDX, Financial)
Becton, Dickinson and Co. is engaged principally in the manufacture and sale of a broad line of supplies, devices and systems used by health care professionals, medical research institutions and the general public. Becton Dickinson And Company has a market cap of $18.83 billion; its shares were traded at around $83.23 with a P/E ratio of 16.42 and P/S ratio of 2.55. The dividend yield of Becton Dickinson And Company stocks is 1.97%. Becton Dickinson And Company had an annual average earning growth of 14% over the past 10 years. GuruFocus rated Becton Dickinson And Company the business predictability rank of 5-star.
John Hussman owns 1,000,000 shares as of 09/30/2010.
Check out Hussman’s portfolio by clicking on John Hussman.
