Neil J. Hennessy      Portfolio Manager and Chief Investment Officer, Hennessy Funds

Comments & Outlook

I think the market’s in great shape. Going forward we’re going to have a lot more sustainable growth than we’ve seen; people across the United States, no matter their background, now understand leverage so it will continue to go down.

That’s going to be very bullish for companies because growth won’t be measured from quarter to quarter. People are going look for long-term growth. The market will return to normalcy over time as the speculation encouraged by leverage dissipates.

Recommended Strategy

We look at the price-to-sales ratio as an indicator of value within a company. Over the last ten years, which now encompasses two bear markets, people were willing to pay $1.25 for $1 in sales. Today, you can buy $1 in revenue on the Dow Jones for 78 cents, a 22 percent discount. That’s a lot of upside.

The perception out there is that every company is losing money and laying people off. That’s just not the case. In fact, 27 out of 30 Dow Jones stocks made money. This last occurred in 2002. Companies got lean and mean going into 2003, and the market took off that year. That’s the same scenario today. Companies are getting lean and mean and looking to 2010. People still don’t really understand that.

What to Buy Now

The lower end of consumer discretionary will do well. Wal-Mart Stores (NYSE: WMT) is one name we like. In the past a lot of consumers wouldn’t even think of setting foot in a Wal-Mart. But now that they don’t have the money, they go in and find out that it has almost everything in the world for cheap. Going forward, Wal-Mart will pick up more shoppers.

Ross Stores (NSDQ: ROST) is a similar story. You can also look at Rent-A-Center (NSDQ: RCII). If there’s no cash or credit available out there and you need a couch or a refrigerator, you can go to a Rent-A-Center and rent-to-own.

Robert C. Auer      Senior Portfolio Manager, Auer Growth Fund

Comments & Outlook

The question at the forefront of everybody’s mind right now is whether this recovery is a rally in a bear market or the start of a new bull market. We’re very bullish and believe that the market will work itself higher–the Dow Jones Industrial Average could top 10,000 points. That’s not to suggest that there won’t be pullbacks, but we don’t think the market will retest the lows hit on March 9. Economic conditions will continue to deteriorate–that will confuse some people. But the market is a forward-looking indicator, and even with a stream of bad news stocks like Bank of America (NYSE: BAC) continue to go up; that’s because the pendulum has started to swing the other way.

And as the market continues its ascent, that momentum turns the screws on the doubters, the short sellers and institutional investors that have a lot of money on the sidelines. Once that money reenters the market, the movement will be explosive.

Recommended Strategy

We look for companies that are growing like Google (NSDQ: GOOG) or Apple (NSDQ: AAPL) but have deep-value earnings ratios–in other words, we’re looking for explosive growth at a cheap price. There aren’t many companies that meet our criteria these days, but we’re still finding growing companies where the price-to-earnings ratios are attractive.

What to Buy Now

One stock that we’re very excited about is Par Pharmaceuticals (NYSE: PRX), a generic drug company. Although we follow a disciplined quantitative approach–in some ways the stocks choose us rather than vice versa–this is a play on President Obama’s healthcare reforms. We think that generics could benefit from these policies. Analysts were looking for earnings of 27 cents per share, and the company generated income from operations of 49 cents per share. Much of this stems from a heart medication that went off patent; Par Pharmaceuticals is the preferred provider of this drug and should continue to benefit.