Neil Hennessy is chairman, chief investment officer and founder of Hennessy Funds, a mutual-fund company based in Novato that was founded in 1989.
The company, with 23 employees, has 14 funds, including five domestic equity funds, three that include some bonds, and six sector and specialty funds. Hennessy Advisors, a separate company that is publicly traded, is the investment manager that services and markets Hennessy Funds.
North Bay Business Journal interviewed Hennessy on April 4.
What is the current valuation of total assets of Hennessy Funds, near $7 billion?
We are at about $6.7 billion.
In the last month or so, the market has shown renewed volatility?
All we hear is that we’re in the ninth year of the bull market and it has to end. Nobody gives any reasons why it should end. When you look back at the 1982 to 2000 period, it (market) was up each year with the exception of 1990, when it was down half of one percent. In the beginning of that period, we had 18 percent inflation and 21 percent interest rates.
In October 1987, we lost 25 percent (22.6 percent) of market value in one day. Unbelievable. The Nasdaq was up 86 percent in 1999, euphoria. We knew that was going to come to an end. There is no euphoria in this marketplace.
If we were to bring Alan Greenspan (former Fed chairman) in here, he would not say there is “irrational exuberance”?
No. Absolutely not. There is no euphoria. They call me the ultimate bull. There was euphoria that crept into the real estate marketplace in 2004, 2005. (Buyers put) no money down, didn’t have to qualify. The euphoria went away (with drop of nearly 45 percent in some markets). In 2008 and early 2009, (many) banks went (or appeared to go) broke. They weren’t broke.
Bank of America made a good deal to buy Merrill Lynch during that crisis, in 2009 (all-stock deal initially $50 billion that turned out closer to $20 billion)?
Yes. But in late 2008 and 2009, customers were still able to go to the bank and get cash, write checks and have them cashed.
Everything worked in most banks?
Everything worked. When I look at today’s market, corporate earnings have been very healthy through a difficult regulatory climate. Businesses figured out how to continue to make money.
How to manage Dodd-Frank (Wall Street Reform and Consumer Protection Act, 2010)?
Bankers had to incorporate it and figure out what to do.
It made banks with less than about half a billion dollars in assets hard to manage because of the cost of compliance?
Big business loves regulation. They have all the people to do it. It affects small businesses. More regulation puts small businesses out of business. We already had disciplinary measures in place, especially in the securities industry.
The market (Dow) is at about 24,000. Could we go to 30,000 or 40,000?
We are on the way to 30,000.
How long? Two years?
In the next three to five years. The Dow Jones is selling for about 19 times earnings. You take into account the new tax law (corporate taxes dropped this year from 35 percent to 21 percent) and we are at 15 to 17 (times earnings) range.