Economics Professor-turned money manager John Hussman has been calling market being over-valued and market internals being unfavorable for the past couple of months, and he has been proved to be right by the recent 15% market correction. His fund is up 5.87% YTD whereas the overall market is down about 8.2% YTD. Good job, Professor!
Just as if being bearish towards the market is not enough, in the past weekend, John Hussman published a letter on his company’s website and warned us that “the U.S. economy appears headed into a second leg of an unusually challenging downturn.” The letter is full of technical terms, but his message is clear: we are in trouble.
And his track record of predicting these kinds of things seems to be rather good. In recent history, he made the same predictions in November 2007 and October of 2000 based on the same model, of course, you know what happened afterwards in the two previous cases.
Here is a Q&A during an interview with MorningStar with Ryan Leggio of MorningStar:
Leggio: John, why are you so worried right now?
Hussman: Well, in terms of recession risk, the syndrome of indications that we're seeing right now are indications that we've only seen during recessions or immediately prior to new downturns in the economy. This is the same set of indicators that we used in November 2007 when we got that recession warning and reported that, and I did a CNBC interview, which is rare for me, when we did that, because I thought it was an important thing to underscore for investors. And we saw the same set of signals in October of 2000 prior to that breakdown in the economy and the stock market.
And for those of us who would like to receive information via a video, here it is, courtesy of Morningstar.com:
Less timely, but still quite relevant is the information on the stocks John Hussman kept buying during the past two quarters. Since he has not filed his holdings for 2Q2010, which he will do before August 15, we are really talking about 4Q09 and 1Q10. John Hussman has been singing a bearish tune for a number of months, so a convicted buying means something.
Overall market can be overvalued, individual stocks maybe not. John Hussman’s stock fund is 100% hedged, so if the overall market tanks, as it has during the past two months, the fund will be protected. Still, there is no reason for him kept on buying a stock unless he believe there is a good chance for it to go up. Who wants to be the enemy of his/her own money?
Now here is the list of stocks John Hussman has been buying for at least two quarters:
No. 1: Waters Corp. (NYSE:WAT), Weightings: 1.74% - 1,458,000 Shares
John Hussman owns 1,458,000 shares of WAT, valued as $98 million as of Mar. 31, 2010, which accounts for 1.74% of his equity portfolio. John Hussman added his positions in the Dec. 31, 2009 quarter by 16.2%, again in the Mar. 31, 2010 quarter by 25.47%.
Waters Corporation is a holding company which owns only and all of the outstanding common stock of Waters Technologies Corporation, the operating subsidiary. Waters Corp. has a market cap of $5.91 billion; its shares were traded at around $63.56 with a P/E ratio of 18.1 and P/S ratio of 4. Waters Corp. had an annual average earning growth of 12.4% over the past 10 years. GuruFocus rated Waters Corp. the business predictability rank of 4.5-star.
No. 2: FactSet Research Systems Inc. (NYSE:FDS), Weightings: 1.62% - 1,250,000 Shares
John Hussman owns 1,250,000 shares of FDS, valued as $92 million as of Mar. 31, 2010, which accounts for 1.62% of his equity portfolio. John Hussman added his positions in the Dec. 31, 2009 quarter by 6.48%, again in the Mar. 31, 2010 quarter by 8.7%.
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 $3.12 billion; its shares were traded at around $66.81 with a P/E ratio of 22.2 and P/S ratio of 5. The dividend yield of Factset Research Systems Inc. stocks is 1.4%. Factset Research Systems Inc. had an annual average earning growth of 20.8% over the past 10 years. GuruFocus rated Factset Research Systems Inc. the business predictability rank of 5-star.
No. 3: Synaptics Inc. (NASDAQ:SYNA), Weightings: 1.46% - 3,000,000 Shares
John Hussman owns 3,000,000 shares of SYNA, valued as $83 million as of Mar. 31, 2010, which accounts for 1.46% of his equity portfolio. John Hussman added his positions in the Dec. 31, 2009 quarter by 26.84%, again in the Mar. 31, 2010 quarter by 72.02%.
Synaptics is a developer of human interface solutions for a wide variety of mobile computing and communications devices and is the supplier of TouchPads to the notebook computer market. Synaptics Inc. has a market cap of $928.8 million; its shares were traded at around $27.42 with a P/E ratio of 21.5 and P/S ratio of 2. Synaptics Inc. had an annual average earning growth of 24.6% over the past 10 years.
No. 4: Pfizer Inc (NYSE:PFE), Weightings: 1.18% - 3,897,000 Shares
John Hussman owns 3,897,000 shares of PFE, valued as $67 million as of Mar. 31, 2010, which accounts for 1.18% of his equity portfolio. John Hussman added his positions in the Dec. 31, 2009 quarter by 16.67%, again in the Mar. 31, 2010 quarter by 122.69%.
Pfizer Inc is a research-based, global pharmaceutical company that discovers and develops innovative, value-added products that improve the quality of life of people around the world and help them enjoy longer, healthier, and more productive lives. Pfizer Inc has a market cap of $114.78 billion; its shares were traded at around $14.23 with a P/E ratio of 6.9 and P/S ratio of 2.3. The dividend yield of Pfizer Inc stocks is 5.1%. Pfizer Inc had an annual average earning growth of 1.8% over the past 10 years.
No. 5: Dell Inc. (NASDAQ:DELL), Weightings: 0.53% - 2,000,000 Shares
John Hussman owns 2,000,000 shares of DELL, valued as $30 million as of Mar. 31, 2010, which accounts for 0.53% of his equity portfolio. John Hussman added his positions in the Dec. 31, 2009 quarter by 17.07%, again in the Mar. 31, 2010 quarter by 13.9%.
Dell Inc. is a premier provider of products and services required for customers worldwide to build their information-technology and Internet infrastructures. Dell Inc. has a market cap of $23.55 billion; its shares were traded at around $12.03 with a P/E ratio of 11.5 and P/S ratio of 0.5. Dell Inc. had an annual average earning growth of 4.1% over the past 10 years.
Despite harsh assessment on the overall economic prospective and stock market valuation level, Hussman bought and continued to buy stocks listed above.
To check the complete list of of John Hussman, please go to http://www.gurufocus.com/holdings.php?GuruName=John+Hussman
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