Talk about optimism! Neil Hennessy not only believes that the stock market is wondrously undervalued, but that a buying frenzy will set in—and once it does, the market may soar 1,000 points in one day.
“Sooner? Or later?” He responds drily: “Yes.”
Hennessy, the chief investment officer and portfolio manager of the Hennessy Funds, points out that 29 of the 30 stocks in the Dow Jones Industrial Average are profitable.
Also, for the past five years the average price-sales ratio of Dow stocks was $1.18 to $1. For the past 10 years, it was $1.31 for $1. “Now, for every $1 in revenues, you pay a measly 74 cents.”
The last time this happened, he went on, was in November 1996, and from then until Jan. 14, 2000, the market rose 98% -- or 24% a year.
But what if revenues fall off the table?
If they drop by 10%, he says, then the ratio would be .87 today -- and to get back to the five-year average, stocks would have to move up by 36%; sales of all 30 Dow stocks would have to fall on average by 35% to get to the levels we are at today.
Then, too, the Dow average is yielding around 4%. “You can’t even get that from 10-year Treasuries,” he points out.
“People are just scared,” he said at a press conference in New York City Wednesday. His explanation: Today the investment markets get far too much attention from the media compared with the past.
What would Hennessy invest in now? The ten highest-yielding stocks in the Dow. And stocks that should benefit as people get more tight-fisted – Dollar Tree, Rent-A-Center. And Corinthian Colleges, as people switch to more practical careers.
But don’t jump in with both feet, he warns. It may take some time for investors to become as optimistic as they are pessimistic now.
The no-load Hennessy Focus 30 Fund is rated above-average by Morningstar.
“Sooner? Or later?” He responds drily: “Yes.”
Hennessy, the chief investment officer and portfolio manager of the Hennessy Funds, points out that 29 of the 30 stocks in the Dow Jones Industrial Average are profitable.
Also, for the past five years the average price-sales ratio of Dow stocks was $1.18 to $1. For the past 10 years, it was $1.31 for $1. “Now, for every $1 in revenues, you pay a measly 74 cents.”
The last time this happened, he went on, was in November 1996, and from then until Jan. 14, 2000, the market rose 98% -- or 24% a year.
But what if revenues fall off the table?
If they drop by 10%, he says, then the ratio would be .87 today -- and to get back to the five-year average, stocks would have to move up by 36%; sales of all 30 Dow stocks would have to fall on average by 35% to get to the levels we are at today.
Then, too, the Dow average is yielding around 4%. “You can’t even get that from 10-year Treasuries,” he points out.
“People are just scared,” he said at a press conference in New York City Wednesday. His explanation: Today the investment markets get far too much attention from the media compared with the past.
What would Hennessy invest in now? The ten highest-yielding stocks in the Dow. And stocks that should benefit as people get more tight-fisted – Dollar Tree, Rent-A-Center. And Corinthian Colleges, as people switch to more practical careers.
But don’t jump in with both feet, he warns. It may take some time for investors to become as optimistic as they are pessimistic now.
The no-load Hennessy Focus 30 Fund is rated above-average by Morningstar.
