Small and Powerful: Hennessy Small Cap Financial Fund
If you’re looking to add some pop to your portfolio and financial stocks are your thing, you’ll want to consider the Hennessy Small Cap Financial Fund (HSFNX). The fund is managed by David Ellison — the most tenured mutual fund portfolio manager in the financial services sector.
Ellison looks for companies whose market caps are less than $3 billion and have a quality management team in place, an uncomplicated business model, conservative lending habits, sustainable earnings growth opportunities, a low cost operating structure and an attractive valuation relative to the industry. Clearly Ellison’s knows from experience that it pays to be picky.
Since the fund’s inception in January 1997, it’s achieved an annualized total return of 10.75%. In terms of industry allocation, 33% of the portfolio’s 65 stocks are invested in thrifts and mortgage finance companies with another 29% in regional banks. The largest holding is Popular Inc. (BPOP) — the 36th largest U.S. bank holding company by assets.
In terms of fees, the annual expense ratio is 1.45%, which Morningstar considers above average. But once again, you take the good with the bad. Experience helps, especially when it comes to small-cap stocks.