This fund pursues two investment strategies. In the first strategy the fund owns a portfolio of stocks. It usually owns around 270 stocks in fairly equal amounts. Usually no stock is more than 2% of the fund and most of its holdings are around 1% of the fund each.
The stocks are selected using metrics developed by manager John Hussman that seek to identify growing companies selling at attractive prices. Most of the stocks are core holdings the fund plans to hold for the long term. Hussman says that over the life of the fund the stock picks have a higher total return than the S&P 500.
In the second strategy the fund uses futures and options to either leverage the portfolio in anticipation of positive market returns or hedge the portfolio against a potential market decline. Two factors are examined to determine the futures and options positions.
The first factor is market valuations, which is a long-term factor. Hussman looks at a series of valuation measures and assesses the likely return for the S&P 500 over the next 10 years.
The second factor is a set of data that measure what Hussman calls market internals. These measures are designed to assess generally whether investors as a whole or in a speculative mode, a risk-adverse mode, or something in between. These measures are shorter-term.
The valuation measures have been bearish for some time, causing the fund to be hedged against a market decline much of the time. But when the market internals turn positive, the hedges can be reduced or eliminated for a while though the valuation measures might be negative.
HSGFX had a return of more than 16% in 2022. The combination of strategies should protect investors from a bear market and even profit from it in 2023. But investors in this fund also might profit if the bear market ends and the market internals turn positive.