Hennessy Advisors Inc's Business Segments

We are a publicly traded investment management firm whose primary business activity is managing, servicing and marketing 16 open-end mutual funds branded as the Hennessy Funds. We are committed to employing a consistent and repeatable investment process for the Hennessy Funds, combining time-tested stock selection strategies with a highly disciplined, team-managed approach, and to providing superior service to investors. Our goal is to provide products that investors can have confidence in, knowing their money is invested as promised, with their best interest in mind. Our firm was founded on these principles over 26 years ago and the same principles guide us today.

We earn revenues primarily by providing investment advisory services to the Hennessy Funds. We also provide shareholder services to the Hennessy Funds, but we have only earned shareholder service fees from all of (instead of some of) the Hennessy Funds since March 1, 2015. Investment advisory services include managing the composition of each fund’s portfolio (including the purchase, retention, and disposition of portfolio securities in accordance with the fund’s investment objectives, policies, and restrictions), conducting investment research, monitoring compliance with each fund’s investment restrictions and applicable laws and regulations, overseeing the selection and continued employment of sub-advisors and monitoring such sub-advisors’ investment performance and adherence to investment policies and compliance procedures, overseeing other service providers, maintaining public relations and marketing programs for each of the funds, preparing and distributing regulatory reports, and overseeing distribution through third party financial intermediaries. Shareholder services include maintaining an “800” number that the current investors of the Hennessy Funds may call to ask questions about the funds or their accounts, or to get help with processing exchange and redemption requests or changing account options. The fees we receive for investment advisory and shareholder services are calculated as a percentage of the average daily net asset values of the Hennessy Funds. Accordingly, our revenues increase or decrease as our average assets under management rise or fall. The percentage amount of the investment advisory fees vary from fund to fund, but the percentage amount of the shareholder service fees is consistent across all funds.

Hennessy Advisors Inc. is a well-established investment management firm known for its comprehensive array of investment products and services. The companys offerings are divided into several categories, including Domestic Equity Funds, Balanced and Fixed Income Funds, and Sector and Specialty Funds. Below is an extensive overview of these segments, detailing their products and strategies.

Domestic Equity Funds

Hennessy Advisors offers seven funds classified as Domestic Equity products. Of these, five employ quantitative investment strategies, while two are actively managed. The funds utilize a disciplined, team-managed approach to investment, focusing on capital growth through various strategies.

1. Hennessy Cornerstone Growth Fund (HFCGX/HICGX)
- Objective: Seeks long-term growth of capital.
- Strategy: Utilizes a quantitative formula to identify growth-oriented common stocks. The selection criteria include:
- Market capitalization exceeding $175 million.
- Price-to-sales ratio lower than 1.5.
- Higher annual earnings than the previous year.
- Positive stock price appreciation over the past three to six months.
- The fund typically focuses on the 50 stocks with the highest one-year price appreciation, often favoring small-cap companies but occasionally including mid- and large-cap firms.

2. Hennessy Focus Fund (HFCSX/HFCIX)
- Objective: Aims for capital appreciation through a concentrated portfolio.
- Strategy: Employs a bottom-up approach, curating a portfolio of 20 to 30 high-quality, growth-oriented companies characterized by:
- Strong competitive positions.
- Predictable cash earnings growth.
- High return on invested capital.
- Excellent management.
- Modest valuations.
- Approximately 60-80% of the funds assets are invested in the top 10 holdings.

3. Hennessy Cornerstone Mid Cap 30 Fund (HFMDX/HIMDX)
- Objective: Seeks long-term capital growth.
- Strategy: Targets mid-cap growth-oriented companies with market capitalizations between $1 to $10 billion. Selection criteria include:
- Price-to-sales ratio below 1.5.
- Higher annual earnings than the previous year.
- Positive stock price appreciation over defined periods.
- The fund invests in 30 common stocks with the highest one-year price appreciation.

4. Hennessy Cornerstone Large Growth Fund (HFLGX/HILGX)
- Objective: Focuses on long-term capital growth.
- Strategy: Invests in larger growth-oriented companies via a quantitative formula, seeking stocks with:
- Market capitalization above the database average.
- Price-to-cash flow ratio below the database median.
- Positive total capital performance.
- The fund selects 50 stocks with the highest one-year return on total capital.

5. Hennessy Cornerstone Value Fund (HFCVX/HICVX)
- Objective: Seeks total return through capital appreciation and income.
- Strategy: Invests in larger, dividend-paying companies based on a quantitative screening process that considers:
- Market capitalization above the database average.
- Sizable cash flow and sales relative to industry standards.
- The fund focuses on 50 stocks with the highest dividend yields.

6. Hennessy Large Value Fund (HLVFX/HLVIX)
- Objective: Pursues long-term growth of capital and current income.
- Strategy: Concentrates on undervalued stocks based on various valuation metrics (earnings, dividends, assets) while also evaluating business quality and future potential.

Hennessy Total Return Fund (HDOGX)
- Objective: Aims for total return through capital appreciation and current income.
- Strategy: Allocates approximately 50% of its assets to the top 10 highest dividend-yielding stocks in the Dow Jones Industrial Average (the Dogs of the Dow). The remaining assets are invested in short-term U.S. Treasury securities. The fund employs a borrowing strategy to enhance performance towards a 75%/25% allocation between Dogs of the Dow and Treasury securities.

Balanced and Fixed Income Funds

Hennessy offers three funds in the Balanced and Fixed Income category, focusing on generating income and offering conservative investment alternatives.

1. Hennessy Equity and Income Fund (HEIFX/HEIIX)
- Objective: Seeks long-term capital growth and current income.
- Strategy: Aims for a balanced portfolio, investing about 60% in high-quality, dividend-paying stocks and 40% in high-quality, domestic fixed-income securities.

2. Hennessy Balanced Fund (HBFBX)
- Objective: To achieve capital appreciation and current income.
- Strategy: Invests 50% in Dogs of the Dow and 50% in short-term U.S. Treasury securities, providing balance and income opportunity.

3. Hennessy Core Bond Fund (HCBFX/HCBIX)
- Objective: Aims for current income with potential capital growth.
- Strategy: Focuses on higher quality, intermediate-term fixed income securities, primarily investing in investment-grade corporate, agency, and governmental bonds.

Sector and Specialty Funds

This category includes six funds, with a focus on niche sectors of the stock market, encompassing both index and actively managed options.

1. Hennessy Gas Utility Fund (GASFX)
- Objective: Seeks income and capital appreciation.
- Strategy: Invests in companies within the American Gas Association, using a market cap-weighted approach based on natural gas asset percentages.

2. Hennessy Small Cap Financial Fund (HSFNX/HISFX)
- Objective: Aims for capital appreciation.
- Strategy: Targets small-cap financial services companies with valuations under $3 billion, prioritizing firms with strong management and sustainable growth opportunities.

3. Hennessy Large Cap Financial Fund (HLFNX/HILFX)
- Objective: Focuses on capital appreciation.
- Strategy: Invests in large-cap financial firms exceeding $3 billion in market capitalization, emphasizing long-term growth potential.

4. Hennessy Technology Fund (HTECX/HTCIX)
- Objective: Seeks capital appreciation.
- Strategy: Invests in technology companies engaged in product development and distribution, selecting firms with competitive advantages and solid growth prospects.

5. Hennessy Japan Fund (HJPNX/HJPIX)
- Objective: Seeks long-term capital appreciation.
- Strategy: Invests in Japanese companies across market capitalizations, identifying stocks that represent a value gapbased on strong fundamentals and favorable pricing.

6. Hennessy Japan Small Cap Fund (HJPSX/HJSIX)
- Objective: Aims for long-term capital appreciation.
- Strategy: Focuses on smaller Japanese firms (the bottom 15% in terms of market cap), searching for companies with robust management and attractive valuations.

Conclusion

Hennessy Advisors Inc. provides a diverse set of investment products and services tailored to different investor needs and risk profiles. From robust domestic equity funds featuring both quantitative and fundamental strategies to balanced funds that cater to conservative investors, as well as focused sector funds, Hennessys offerings are designed to deliver flexibility, quality, and growth potential in various market conditions.