That performance, he said, gives investors a clue about where success will be found next year. No longer are Microsoft, Tesla, Facebook, Amazon, Apple, Nvidia and Google the backbone of performance. The leaderboard is changing, and investors need to change with it.
If 2020 was all about large-cap tech and working-from-home stocks, 2021 was all about financials and energy, and 2022 has been all about energy, with its positive returns, and the defensive stocks (like consumer staples and utilities), he said. “While just about flat for the year, [defensive stocks are] doing much better than the rest of the market,” he said.
Value investing is continuing to have its moment, and Kelley said he believed that would remain the case for much of 2023.
“It’s important to stay invested, important to stay diversified,” he said. “But given what we think about the market right now and the volatility that we see out there, we think sticking with value is still a good place to be.”
As far as sectors that Hennessy Funds likes in the near future, Kelley said they include financial stocks (which are attractively priced at about half of the overall market), utilities (which are a slow and steady play) and energy.
Hennessy Funds, which runs 16 funds with $3.2 billion in assets under management, has had a particularly good year, Kelley said.
“The reason that’s important is we do often lag on the upside. We’re not going to be among some of the high-flying names, and we’re not going to participate fully sometimes on the upside,” he said. “But we’ve always told our investors that it’s important to protect on the downside. And that’s what we’ve done this year.”
Out of the 14 domestic funds in the Hennessy stable, 11 are outperforming the S&P 500, seven have positive total returns, nine are beating their own primary benchmarks, and eight are in the top quartile rankings of their category at Morningstar, Kelley said.
“It’s nice to see the numbers and know that at least what we’ve been saying all these years is actually coming true.”