John Hussman Investing Philosophy
Dr. Hussman looks at two dimensions of information to adjust his willingness to take risk. The first is valuation. F avorable valuation means that stock prices appear reasonable in view of the stream of earnings, dividends, revenues and cash flows expected in the future. The second dimension is the quality of market action . Market action considers the behavior of a wide range of securities and industry groups, in an attempt to assess the economic outlook of investors and their willingness to accept market risk. These two dimensions of information make up four basic "Market Climates" associated with various combinations of valuation and market action. For stocks, in order of most favorable to least favorable, these Climates are: favorable valuation / favorable market action, unfavorable valuation / favorable market action, favorable valuation / unfavorable market action, and unfavorable valuation / unfavorable market action. In the most favorable Climates, Dr. Hussman will typically hold an aggressive allocation to market risk, while in the least favorable Climates, he will typically attempt to remove the impact of market fluctuations from the portfolio through hedging (Strategic Growth Fund) or reduction in the average maturity of bond holdings (Strategic Total Return Fund). The most defensive position is a fully hedged position in which the entire value of long positions is hedged. Dr. Hussman writes a weekly commentary which provides deep insight about current stock market valuations and actions. We 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.
Performance of Hussman Strategic Growth Fund
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