Simple Formulas for Success

The Hennessy funds use a computer models to pick stocks. And their recipes are surprisingly straightforward.

You almost do have to be a rocket scientist to decipher the formulas employed in computer-driven mutual funds. In their mission to identify the most promising stocks, many quantitative-based funds use complex software programs that average investors -- and even professionals -- may find baffling. Some quant managers, such as John Montgomery of the Bridgeway funds, consider the formulas intellectual property and divulge few details about how they work.

Neil Hennessy takes the opposite approach. He gives up just about every detail of the stock-picking process used for his six Hennessy funds. As it turns out, the recipes are remarkably simple. "Our philosophy is to use models that could be understood by your average investor," says Hennessy, 51. "What we do, individuals could do themselves -- we just make it more cost-effective."

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Staff Writer, Kiplinger's Personal Finance