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Well, you know, when you have markets down 800, 600 points in one day, it doesn't really matter what you value or what everybody is going out. But over to long term, value managers will do a lot better than an index, that's been proven in the past. We've seen this before, where passive overtakes fundamentals, but it always comes back to fundamentals. For instance, when the market was up 1,000 points, almost 1,100 points in that one day, that was managed almost five stocks. The facts, right?

- I've seen that rise in recent years.

- Right, so essentially when you're buying for us, we're looking for value with price to sales, companies with price to sales ratios 1.5 or less. In simple terms, we're not gonna pay more than a dollar fifty for a dollar in sales. But you can look at some companies that are selling at 30 to one. So essentially, you'd be paying 300 million for 10 million dollars in sales when we wouldn't pay more than 15 million for 10 million dollars in sales.

- And is that the way the markets moving, this year from those high gross stocks that have done so well recently, more to that value of investors? Is the market gonna favor the value investor more moving forward this year specifically?

- Over to the long term, the value investor will be rewarded. Whenever you're buying growth, you're paying up for something that might or might not happen in the future. So, if something doesn't happen, you're equity goes away very quickly. If you buy value, it might get cheaper, but its just that much more of a value. So, over all, when you're looking at the market place, its no different than anything else you do. if you buy a quality coat, its gonna be with you a long time. If you don't, its not gonna be around too long.

- Fair enough, fair enough. And the the other thing I wanted to talk to you about, was, you talk a lot about timing the market as far as looking at euphoria. That's something I always remember you talking about. You're not very bearish on the market moving forward in 2019. What would it take for you to see that euphoria, that would signal a downfall in your mind?

- Okay, Kevin, you're young so let me just take you back in time. In today's market, euphoria we do not have. Any way, shape or form. But if you go back into the mid 80's, the euphoria was in the real estate market and that took over everything, to when real estate crashed at the end of the 90's. In fact, 837 banks and and savings alone approximately went under because of real estate. So then we saw at the end of the 90's, we saw euphoria in the .coms, okay? We knew that was gonna blow up because the market was up 86% in 1999 alone. So that blew up. Then we saw in 2004, five, six and seven, real estate, once again, where can I buy real estate? Where can I get something with nothing down? And we saw that blow up. In today's market, we don't have euphoria on the upside. What you have is people saying 'well, markets been up for 10 years Kevin and we're heading into a recession.' really, a recession? The only way you're gonna get into a recession is if people don't have jobs. People have job, when they have jobs. We're at three and a half percent unemployment and more people coming into the work force. If people have a job, they'll spend, they'll invest, and they'll save and that's all good for an economy. So when people look at it bearish and not giving you any reason why, because I can tell you right now. If I told you that mortgage rates would be under five percent, that unemployment would be at three and a half percent, that cash on corporate balance sheets would be an all time high, that earnings are up, cash flow is at a historical high, what would you want me to do? Say we're bearish?

- I'm not asking you to do anything, I'm looking for the opinion. Apparently I'm too young to remember that, but I'm glad to be educated on the subject. And then the last thing I wanted to ask about was, with that being said, obviously if people have jobs the consumer is strong as well, and peoples purchasing power seems to be powerful as well. Certainly the jobs report recently as fantastic. I was curious about what your outlook is on consumer discretionary, cause that's a huge weight in your portfolio, and any specific picks in that sector.

- I just think when you look at consumer discretion it can go to a lot of different fields. You can go from, say, American Outfitters to Casey's general store. I mean, Casey's general store's, you know, they got a low price to sales, they have their dividens covered 3,4 to 1. They're making a ton of money, and here's just a gas station, food operator. Most towns that have 5,000 or less people, that are making 5 dollars a share, so there's a lot of value out there to be had. The consumer, as long as they have money in their pocket will spend. Corporations are the same. You look at the s&p 500, those 500 companies have over five trillion dollars on their balance sheet in cash and short term investments. They're spending it, either on buy backs,

- Definitely on buy backs.

- Dividen increases, and capitol expenditures. So, consumers are no different than corporations, corporations no different than consumers. If you have the money in your pocket, you're gonna spend it or invest it or save it, and all three are very good for the economy.

- Gotcha, well, all the consumers that have money in their pocket, can read thestreet.com to learn where to invest that money if they so choose. Thank you very much Neil, I appreciate it.

- Thank you

Amid some recent volatility, many investors may be looking away from the indices that have garnered manager-beating returns for almost 10 years straight.

The same goes for stock pickers as popular stocks like Amazon (AMZN - Get Report)  and Facebook (FB - Get Report) encountered some tough treading in recent months and took down FAANG-focused portfolios.

As such, it may be an opportunity for fundamental-driven, active managers to win out.

"Over the long term, value managers will do a lot better than an index," Neil Hennessy, CIO at Hennessy Funds told TheStreet. "We've seen this before where passive overtakes fundamentals, but it always comes back to fundamentals."

He added that he is looking for value in the price to sales ratios of companies, eschewing the high flying stocks like Twilio (TWLO - Get Report) and Netflix (NFLX - Get Report) that have led the market in recent years, but come with larger potential downsides.

"Over the long term, the value investor will be rewarded," he said. "Whenever you're buying growth, you're paying up for something that might or might not happen in the future...if you buy a quality coat it's going to be with you a long time. If you don't, it's not going to be around too long."

For more on investing for the long term and the virtues of value investing, check out the video above.

For Neil's 2019 outlook and some specific stock picks in his mid-cap focused portfolio (HFMDX - Get Report) , click here.