It’s one of the truths of mutual fund investing: You buy the manager as much as the prospectus. So it pays to have someone you trust.

Neil Hennessy, who runs the Hennessy Focus 30 fund (HFTFX), might be someone investors trust for what he does as much as what he doesn’t do. Since its September 2003 launch, the Focus 30 has returned 6.76% annually, beating the S&P 500 by an average of 4.8% a year by following a simple, quantitative strategy. Hennessy only reshuffles the fund’s 30 stocks once a year, usually in the fall. That means two things: He can’t time the market and he can’t let feelings get in the way.

After writing about his flagship fund back in February, we recently checked in with Hennessy. He had just finished rebalancing the Focus 30 in September, which meant screening 10,000 companies to find mid-cap U.S. securities that pass his requirements for price-to-sales ratio, increased annual earnings, and recent rallies. If a company makes it to the top 30, it’s given equal weight: Each stock makes up 3.33% of the fund.

Last year consumer discretionary stocks composed a third of the portfolio. That led to a paltry 0.7% gain for the portfolio in the past year, but it still beats the S&P 500’s (SPX) 5% drop. Read the rest of this entry »