Dr. John Hussman is the president and principal shareholder of Hussman Econometrics Advisors. He is also the President of the Hussman Investment Trust. Dr. Hussman manages Hussman Strategic Growth Fund, which invests primarily in U.S. stocks, and Hussman Strategic Total Return Fund, which invests primarily in U.S. Treasury and government agency securities.
From the fund inception in July 2000 to Oct. 31, 2008, his Hussman Strategic Growth Fund averaged 9.9% a year, and has a cumulative gain of 118%, while the S&P500 lost more than 23%. For the 12 months ended Oct. 31, 2008, his fund lost 0.3%, while the S&P500 lost more than 40%. The Fund focuses on companies with market caps above $500 million. The Hussman Funds holds $5.36 billion, which is managed by Hussman Economtrics Advisors, Inc. The fund has holdings in 144 companies.
Dr. Hussman looks at two dimensions of information to adjust his willingness to take risk. He evaluates favorable valuation and quality of market action. Favorable valuation considers value of stock prices inline with earnings, dividends, revenues and future cash flows. Quality of market action evaluates the economic outlook (“price behavior and unusual trading volume”) of investors and their willingness to accept market risk. These factors are what Dr. Hussman refers to in his Market Climate analysis in his weekly updates.
Changing Market Climates determines the market risk & return profiles. For example, in favorable Market Climates, Dr. Hussman will typically hold an aggressive allocation to market risk—meaning “leveraging” or increase stock market exposure. While in the less favorable climates, he will try to remove the impact of market fluctuations from the portfolio through “hedging” or reducing market exposure as seen in the Strategic Growth Fund. Likewise for Strategic Total Return Fund, he will reduce the average maturity of bond holdings. The most defensive position is a fully hedged position in which the entire value of long positions is hedged. He discusses this in his Fund Prospectus (pg.3).
Dr. Hussman writes a weekly commentary which provides deep insight about current stock market valuations and actions. Gurufocus strongly encourage our users to read them. As of Nov. 23, he thinks that the market is at favorable valuation level but unfavorable market actions. He is 65% hedged with his equity portfolio. In the prospectus, he said that historical negative/unfavorable market climates occur infrequently at “25% of the time”. He summarized his approach in a diagram (See Fund Prospectus pg. 11).
In his latest Weekly Market Comment John Hussman wrote, “The big picture is this. There is most probably a second wave of mortgage defaults in the immediate future as a result of Alt-A and Option-ARM resets.” He believes the market is still strained from the first mortgage default crisis not long ago. He disapproves the government’s way to “save” or reimburse private sector losses with non-collateral cash.
He wrote that “deeper loan losses are ahead, and if we deal with the next round the same way that we dealt with the last, we will ultimately succeed in debasing the U.S. dollar. There's little inflationary pressure at present, and chances are that fresh credit concerns will create enough demand for government liabilities to forestall inflationary pressures for several years more. But we cannot reimburse the losses of irresponsible lenders with trillions freshly issued government liabilities without those liabilities ultimately eroding in value. The probable real, after inflation return on stocks and bonds over the coming decade is likely to be very unsatisfactory.” Over the next decade, Dr. Hussman predicts S&P500 will yield 6.1% in average annual returns (assuming historical market peaks or growth).
Forest Lab partnered with Cypress Bioscience to market fibro-myalgia drug Savella in April 2009. Cypress Bio reported a loss for the quarter on expenses for launching the drug. In a press release, Forest Lab reported a 5.8% rise in revenue to $2.1 billion from $1.9 billion for the six months ended in September 2009 and the same period in 2008. Net income declined 7.7% on expenses to $449.6 million from net income of $487.0 million reported in the six months of the prior year, due to the net one-time charges.
John Hussman holds 150,000 shares as of September 2009. He has kept his holdings unchanged since March 2008. In the 2007 Fund Report, he held 850,000 Forest Lab shares.
The company says production and shipments will be lower for the fourth quarter as scrap metal prices decline and construction sector weaken. Steel Dynamics says 3Q income fell 64% to $69 million compared to $193 million 3Q of 2008. Revenue decline 54% to $1.17 billion from $2.56 billion during the prior year’s 3Q. Mindful, pricing reached historical peaks in the 2008 third quarter.
John Hussman owns 750,000 shares as of September 2009. He added Steel Dynamics shares in 2008 at one million shares in December.
A subsidiary of United Health, Ingenix plans to acquire health financial management company, CareMedic Systems Inc. for an undisclosed price. The health-management sector book value has declined 24% since September, and UnitedHealth Group was one of the weights pulling down the group. Ongoing deliberation regarding healthcare reform is the current hot topic of legislatures. Washington has already begun changes to the 2010 benefits. UnitedHealth stated that government funding for the Medicare Advantage program has been cut 5%, and long-term preventative care cannot be fully preserved.
John Hussman increased his United Health holdings to 1,500,000 shares as of September 2009. United Health is one of the new purchases Hussman has sought this year.
2008 fiscal year, Petsmart made $5 billion in sales. According to Forbes, the pet retail industry is valued at $45 billion, almost doubled within the past 20 years. In the quarter ending in August, Petsmart reported a 5% revenue increase to $1.31 billion. Income rose to $39 million or $0.31 a share, from $37.2 million or $0.30 a share comparing the quarter and the same period a year ago.
John Hussman holds 750,000 shares as of September 2009. This is a 57.14% less than the previous quarter.
The company said October sales declined 5% to $195 million for stores that’s been open over a year. 3Q sales stayed virtually flat at $749 million. Fiscal year ended in February 2009, American Eagle Outfitters reported a lower net income ($179.1 million) compared to fiscal year ended in 2008 ($400 million).
John Hussman increased his holdings in American Eagle Outfitters by 48% to 2,000,000 shares as of September 2009.
Sources:
HussmanFunds.com
Top 5 Holdings of Hussman Funds:
From the fund inception in July 2000 to Oct. 31, 2008, his Hussman Strategic Growth Fund averaged 9.9% a year, and has a cumulative gain of 118%, while the S&P500 lost more than 23%. For the 12 months ended Oct. 31, 2008, his fund lost 0.3%, while the S&P500 lost more than 40%. The Fund focuses on companies with market caps above $500 million. The Hussman Funds holds $5.36 billion, which is managed by Hussman Economtrics Advisors, Inc. The fund has holdings in 144 companies.
Dr. Hussman looks at two dimensions of information to adjust his willingness to take risk. He evaluates favorable valuation and quality of market action. Favorable valuation considers value of stock prices inline with earnings, dividends, revenues and future cash flows. Quality of market action evaluates the economic outlook (“price behavior and unusual trading volume”) of investors and their willingness to accept market risk. These factors are what Dr. Hussman refers to in his Market Climate analysis in his weekly updates.
Changing Market Climates determines the market risk & return profiles. For example, in favorable Market Climates, Dr. Hussman will typically hold an aggressive allocation to market risk—meaning “leveraging” or increase stock market exposure. While in the less favorable climates, he will try to remove the impact of market fluctuations from the portfolio through “hedging” or reducing market exposure as seen in the Strategic Growth Fund. Likewise for Strategic Total Return Fund, he will reduce the average maturity of bond holdings. The most defensive position is a fully hedged position in which the entire value of long positions is hedged. He discusses this in his Fund Prospectus (pg.3).
Dr. Hussman writes a weekly commentary which provides deep insight about current stock market valuations and actions. Gurufocus strongly encourage our users to read them. As of Nov. 23, he thinks that the market is at favorable valuation level but unfavorable market actions. He is 65% hedged with his equity portfolio. In the prospectus, he said that historical negative/unfavorable market climates occur infrequently at “25% of the time”. He summarized his approach in a diagram (See Fund Prospectus pg. 11).
In his latest Weekly Market Comment John Hussman wrote, “The big picture is this. There is most probably a second wave of mortgage defaults in the immediate future as a result of Alt-A and Option-ARM resets.” He believes the market is still strained from the first mortgage default crisis not long ago. He disapproves the government’s way to “save” or reimburse private sector losses with non-collateral cash.
He wrote that “deeper loan losses are ahead, and if we deal with the next round the same way that we dealt with the last, we will ultimately succeed in debasing the U.S. dollar. There's little inflationary pressure at present, and chances are that fresh credit concerns will create enough demand for government liabilities to forestall inflationary pressures for several years more. But we cannot reimburse the losses of irresponsible lenders with trillions freshly issued government liabilities without those liabilities ultimately eroding in value. The probable real, after inflation return on stocks and bonds over the coming decade is likely to be very unsatisfactory.” Over the next decade, Dr. Hussman predicts S&P500 will yield 6.1% in average annual returns (assuming historical market peaks or growth).
| Performance of Hussman Funds | |||
|---|---|---|---|
| Strategic Growth Fund (HSGFX) | Strategic Total Return Fund (HSTRX) | ||
| Year | Return (%) | Return (%) | S&P500 (%) |
| 2008 | -9.02 | 6.34 | -37 |
| 2007 | 4.16 | 12.61 | 5.61 |
| 2006 | 3.51 | 5.66 | 15.79 |
| 2005 | 5.71 | 6.0 | 4.91 |
| 2004 | 5.16 | 6.5 | 12 |
| 2003 | 21.08 | 9.8 | 28.7 |
| 2002 | 14.02 | - | -22.1 |
| 2001 | 14.67 | - | -11.9 |
| 2000 | 16.4 | - | -9.1 |
Forest Laboratories Inc.(FRX, Financial) 0.08% of Fund Portfolio
Generic drug manufacturer Forest Laboratories, Inc. has a market cap of $8.72 billion; its shares were traded at around $28.89 with a P/E ratio of 8.2 and P/S ratio of 2.2. Forest Laboratories Inc. had an annual average earning growth of 30.7% over the past 10 years.Forest Lab partnered with Cypress Bioscience to market fibro-myalgia drug Savella in April 2009. Cypress Bio reported a loss for the quarter on expenses for launching the drug. In a press release, Forest Lab reported a 5.8% rise in revenue to $2.1 billion from $1.9 billion for the six months ended in September 2009 and the same period in 2008. Net income declined 7.7% on expenses to $449.6 million from net income of $487.0 million reported in the six months of the prior year, due to the net one-time charges.
John Hussman holds 150,000 shares as of September 2009. He has kept his holdings unchanged since March 2008. In the 2007 Fund Report, he held 850,000 Forest Lab shares.
Steel Dynamics Inc. (STLD, Financial) 0.21%
Steel Dynamics Inc. owns and operates a flat-rolled steel mini-mill. The company produces hot-rolled and cold-rolled steel coils used for oil and gas transmission pipe and mechanical and structural tubing. Steel Dynamics Inc. has a market cap of $3.19 billion; its shares were traded at around $14.84 with and P/S ratio of 0.4. The dividend yield of Steel Dynamics Inc. stocks is 2.1%. Steel Dynamics Inc. had an annual average earning growth of 31.9% over the past 10 years.The company says production and shipments will be lower for the fourth quarter as scrap metal prices decline and construction sector weaken. Steel Dynamics says 3Q income fell 64% to $69 million compared to $193 million 3Q of 2008. Revenue decline 54% to $1.17 billion from $2.56 billion during the prior year’s 3Q. Mindful, pricing reached historical peaks in the 2008 third quarter.
John Hussman owns 750,000 shares as of September 2009. He added Steel Dynamics shares in 2008 at one million shares in December.
UnitedHealth Group Inc. (UNH, Financial) 0.7%
UnitedHealth Group Inc. is a healthcare provider that manages services through organized health systems and insurance products. Unitedhealth Group Inc. has a market cap of $34.14 billion; its shares were traded at around $29.37 with a P/E ratio of 9.2 and P/S ratio of 0.4. The dividend yield of Unitedhealth Group Inc. stocks is 0.1%. Unitedhealth Group Inc. had an annual average earning growth of 30.4% over the past 10 years.A subsidiary of United Health, Ingenix plans to acquire health financial management company, CareMedic Systems Inc. for an undisclosed price. The health-management sector book value has declined 24% since September, and UnitedHealth Group was one of the weights pulling down the group. Ongoing deliberation regarding healthcare reform is the current hot topic of legislatures. Washington has already begun changes to the 2010 benefits. UnitedHealth stated that government funding for the Medicare Advantage program has been cut 5%, and long-term preventative care cannot be fully preserved.
John Hussman increased his United Health holdings to 1,500,000 shares as of September 2009. United Health is one of the new purchases Hussman has sought this year.
PETsMART Inc. (PETM, Financial) 0.3%
PETsMART, INC. has a market cap of $3.13 billion; its shares were traded at around $25.03 with a P/E ratio of 15.9 and P/S ratio of 0.6. The dividend yield of Petsmart Inc. stocks is 1.6%. Petsmart Inc. had an annual average earning growth of 29.3% over the past 10 years.2008 fiscal year, Petsmart made $5 billion in sales. According to Forbes, the pet retail industry is valued at $45 billion, almost doubled within the past 20 years. In the quarter ending in August, Petsmart reported a 5% revenue increase to $1.31 billion. Income rose to $39 million or $0.31 a share, from $37.2 million or $0.30 a share comparing the quarter and the same period a year ago.
John Hussman holds 750,000 shares as of September 2009. This is a 57.14% less than the previous quarter.
American Eagle Outfitters Inc. (AEO, Financial) 0.63%
Apparel retailer American Eagle Outfitters Inc has a market cap of $3.35 billion; its shares were traded at around $16.13 with a P/E ratio of 22.7 and P/S ratio of 1.1. The dividend yield of American Eagle Outfitters Inc. stocks is 2.5%. American Eagle Outfitters Inc. had an annual average earning growth of 27.6% over the past 10 years.The company said October sales declined 5% to $195 million for stores that’s been open over a year. 3Q sales stayed virtually flat at $749 million. Fiscal year ended in February 2009, American Eagle Outfitters reported a lower net income ($179.1 million) compared to fiscal year ended in 2008 ($400 million).
John Hussman increased his holdings in American Eagle Outfitters by 48% to 2,000,000 shares as of September 2009.
Sources:
HussmanFunds.com
| Strategic Growth Fund | Strategic Total Return Fund | |||
|---|---|---|---|---|
| Updated as of | 10/31/2009 | |||
| Years to Date | Years to Date | |||
| 1 | -2.46% | 1 | 15.27% | |
| 3 | 0.19% | 3 | 8.71% | |
| 5 | 2.62% | 5 | 7.53% | |
| Since Inception 7/24/00 | 8.50% | Since Inception 9/12/02 | 7.75% | |
Top 5 Holdings of Hussman Funds:
- AstraZeneca PLC (AZN) - 4,000,000 shares, 3.36% of portfolio
- Cisco Systems Inc. (CSCO) - 7,500,000 shares, 3.3% of portfolio
- Aeropostale Inc. (ARO) - 4,000,000 shares, 3.25% of portfolio
- Research In Motion Ltd. (RIMM) - 2,500,000 shares, 3.15% of portfolio
- Best Buy Co. Inc. (BBY) - 4,000,000 shares, 2.8% of portfolio
