A Fund Focused on Valuation, Growth and Momentum

In the following commentary, the Portfolio Managers of the Hennessy Cornerstone Growth Fund discuss the Fund’s formula-based investment strategy and how it drives the Fund’s sector and industry positioning.

June 2026
  • Ryan C. Kelley
    Ryan C. Kelley, CFA
    Chief Investment Officer and Portfolio Manager
  • L. Joshua Wein, CAIA
    L. Joshua Wein, CAIA
    Portfolio Manager

What is the Hennessy Cornerstone Growth Fund’s investment strategy?

The Fund utilizes a formula-based approach in building a portfolio of attractively valued stocks whose stock prices are exhibiting strong relative strength. The strategy seeks to combine elements of both value and momentum investing. From the universe of stocks in the S&P Capital IQ Database, the Fund selects the 50 stocks with the highest one-year price appreciation that also meet the following criteria:

» Market capitalization exceeding $175 million

» Price-to-sales ratio below 1.5

» Annual earnings higher than the previous year

» Positive stock price appreciation over the past three- and six-month periods

Why does the Fund use these screening criteria?

The Fund uses a sales-based valuation metric because sales are more difficult to manipulate than earnings. The price-to-sales ratio works well under many conditions, including when a company’s profitability may be temporarily depressed or when earnings may be artificially inflated.

Higher year-over-year earnings help identify attractive companies, including those that are operating successfully in growth markets, gaining market share, or increasing profitability.

Positive price appreciation over three- and six-month periods generally reflects market recognition of improving underlying fundamentals in the near term.

Why does the formula select stocks with the highest one-year price appreciation?

From among the companies that meet the screening criteria, the Fund selects the 50 with the highest one-year price appreciation. We believe this ranking by relative share price strength can be a good predictor of future price appreciation, or outperformance.

How does the Fund seek to provide a return to investors?

We believe the Fund’s investments present the potential for capital appreciation as a result of earnings growth and potentially increasing valuations.

What is the Fund’s current market cap?

As of June 30, 2026, the Fund has a median market cap of approximately $4.0 billion, above its long-term average of $2.9 billion.

How often does the Fund rebalance its portfolio?

The universe of stocks is re-screened and the portfolio is rebalanced annually, generally in the winter. Holdings are weighted equally by dollar amount with 2% of the Fund’s assets invested in each.

How does the Fund’s portfolio differ from its benchmark?

Compared to its benchmark, the Russell 2000® Index, the Fund is significantly overweight Industrials, Energy, Information Technology, and Materials. This is a significant change from last year’s holdings as much of the momentum in the stock market has changed dramatically from last year’s rebalance period. We note that the Fund has holdings in all sectors except Utilities. The Fund’s largest sector weight is Industrials (24%), which may be driven in 2026 by robust capital spending on A.I. infrastructure, grid electrification, reshoring of manufacturing facilities, and elevated defense budgets. The second largest sector, Energy (20%), could continue its momentum in the latter half of 2026 due to surging electricity demand from AI data centers and reshoring of manufacturing, combined with geopolitical issues. Technology (18%) will be driven by A.I. and the general demand in companies’ and consumers’ replacement cycles. Finally, Materials (11%) are becoming more and more important in manufacturing, while scarcity value and demand continue to increase globally for some metals and strategic chemicals. We believe the Fund’s sector allocations offer a diverse array of opportunities across many small cap companies.

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The Funds' investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read it carefully before investing. A hard copy of the prospectus can be requested by calling 1-800-966-4354.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted and can be found here. Performance data current to the most recent month end may be obtained from HennessyFunds.com Hennessy Funds Standardized Performance

Neither forward earnings nor earnings growth is a measure of a fund’s future performance.

Mutual fund investing involves risk. Principal loss is possible. Current and future holdings are subject to risk. Small and medium-sized companies may have more limited liquidity and greater price volatility than larger companies. Investments in foreign securities may involve political, economic, and currency risks, greater volatility, and differences in accounting methods. The Focus, Total Return, Balanced, Large Cap Financial, Small Cap Financial, and Midstream Funds are considered non-diversified funds. A non-diversified fund, which may concentrate its assets in fewer individual holdings than a diversified fund, is more exposed to individual stock volatility than a diversified fund. A fund that concentrates its investments within one country, one sector, or a small group of industries, such as Japan, Technology, Financials, or Energy, may be subject to a higher degree of market risk. Investments in debt securities typically decrease in value when interest rates rise. The risk is greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Mortgage- and asset-backed securities are subject to prepayment risk, which is the risk that the borrower will prepay some or all of the principal owed to the issuer. Funds that invest in pooled investment vehicles (including ETFs) may experience higher fees. The formula-based strategy employed by some Funds may cause those Funds to buy or sell securities at times when it may not be advantageous.

ETFs are subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an ETF’s shares may trade at a premium or discount to its net asset value, an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a Fund’s ability to sell its shares. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.

Sustainability Investing Risk: (STNC) The risk that applying sustainable investment analysis to the Portfolio Managers’ investment decisions regarding the Fund’s portfolio may forgo certain investment opportunities otherwise available to the Fund. The Fund intends to invest in companies with measurably high sustainability ratings relative to their sector peers, and screen out particular companies that do not meet its sustainability criteria. The Fund believes that these sustainability factors are material to its assessment of the risk-return profiles of companies in which it invests. The relevance and weighting of sustainability criteria may vary significantly among issuers and third-party data providers. Sustainability is a subjective assessment and it is not uniformly defined. Sustainability data may be incomplete, delayed, inaccurate, or unavailable, which could lead to an incorrect assessment of a company’s sustainability characteristics. The Fund’s returns may be lower than other funds that do not seek to invest in companies based on sustainability ratings or screen out certain companies or industries. The Fund seeks to identify companies that it believes may have higher sustainability ratings, but investors may differ in their views of sustainability characteristics. As a result, the Fund may invest in companies that do not reflect the beliefs and values of any particular investor. Regulatory changes regarding the definition or use of sustainability criteria could have a material adverse effect on the Fund’s ability to invest in accordance with its sustainability strategy.

Master Limited Partnerships (MLPs) and MLP investments have unique characteristics. A Fund does not receive the same tax benefits as a direct investment in an MLP.

The prices of MLP units may fluctuate abruptly and trading volume may be low, making it difficult for a Fund to sell its units at a favorable price. MLP general partners have the power to take actions that adversely affect the interests of unit holders. Most MLPs do not pay U.S. federal income tax at the partnership level, but an adverse change in tax laws could result in MLPs being treated as corporations for federal income tax purposes, which could reduce or eliminate distributions paid by MLPs to the Fund. If the Energy Transition Fund’s MLP investments exceed 25% of its assets, it may not qualify for treatment as a regulated investment company (“RIC”) under the Internal Revenue Code (“Code”), and the Fund would be taxed as an ordinary corporation, which could substantially reduce its net assets and its distributions to shareholders. The Midstream Fund is treated as a regular corporation, or “C” corporation, for U.S. federal income tax purposes, and therefore, is subject to U.S. federal income tax on its taxable income at the graduated rates applicable to corporations (currently a maximum rate of 21%) as well as state and local income taxes. The Midstream Fund will not benefit from current favorable federal income tax rates on long-term capital gains, and Fund income and losses will not be passed on to shareholders. The Midstream Fund accrues deferred income taxes for future tax liabilities associated with the portion of MLP distributions considered to be a tax-deferred return of capital and for any net operating gains as well as capital appreciation of its investments. This deferred tax liability is reflected in the daily NAV, and as a result, the Fund’s after-tax performance could differ significantly from the underlying assets even if the pre-tax performance is closely tracked.

Glossary of Terms contains definitions and additional information.

To view the top 10 holdings of a Fund, please click the Fund name: Cornerstone Growth, Focus, Cornerstone Mid Cap 30, Cornerstone Large Growth, Cornerstone Value, Total Return, Equity and Income, Balanced, Energy Transition, Midstream, Gas Utility, Japan, Japan Small Cap, Large Cap Financial, Small Cap Financial, Technology. Fund holdings are subject to change and not recommendations to buy or sell any security.

Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.

News and Media Page:

To view the Morningstar ratings for the Japan Fund, please click here. (Media - TD Ameritrade)

To view the Morningstar ratings for the Focus Fund, please click here. (Media - CNBC-B. Macualey).

1 USD = 105.36 Yen as of 07/27/2020 (Media - Ticker - M. Takeda)

Tom White is a TD Ameritrade Network contributor and is not affiliated with the Hennessy Funds. Content is not investment advice, or a recommendation of any security, strategy, or account type. Options involve risks and are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses.(Media - TD Ameritrade-Rothberg)

To view the Morningstar ratings, please click here.

The Hennessy Funds are offered only to United States residents, and information on this web site is intended only for such persons. Nothing on this web site should be considered a solicitation to buy or an offer to sell shares of any Hennessy Fund in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction.

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