Is The Hussman Dividend Strategic Value Fund Worth Further Examination?

| About: Hussman Strategic (HSDVX)

Summary

The fund is ranked first in the Morningstar Large Value Category in terms of return based on its 3-month and YTD return.

The fund does not have a great amount of exposure to the poor-performing financial services and health-care sectors.

In spite of their strong sturdiness against the downside, the fund's negative upside capture ratio is illustrative of the fund's anemic performance in upward markets.

The Hussman Dividend Strategic Value Fund has an above-average expense ratio.

As I write this, the Hussman Dividend Strategic Value Fund (MUTF:HSDVX) is standing on top of the ladder that is known as the Morningstar Large Value Category.

When one looks at the fund's historical performance in recent years, it has not the best fund to consider during market upticks and bullish markets. This can be seen during 2013 and 2014. In those years, the fund was ranked 99th and 98th as it languished way behind the S&P 500 and other funds in the Morningstar Large Value Category. In 2015, the fund found itself in the red with a -8.39% and was still outpaced by their aforementioned benchmarks.

Recently, this actively-managed fund has managed to mitigate loss in a manner that has outpaced its competitors during this bear market. As you can see below, one can see the aforementioned is particularly true especially based on its 3-Month ratio and YTD Return.

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In spite of their 3-month and YTD performance, one can still see the fund's limited viability in terms of return when it comes to the 1-week ratio. Even on a semi-decent week for the S&P 500, the Hussman Dividend Strategic Value Fund is still lagging behind in terms of return. Thus, it's another example of this fund not being able to cut it in market upticks.

The Hussman Strategic Dividend Value Fund has definitely been assisted by favorable sector weightings. These weightings has led this fund to have limited exposure to poor-performing sectors. The two worst performing U.S Sector ETFs are the financial services and healthcare sectors.

As you can see in the chart below, the fund has less than 2% of portfolio weight in the financial services sector. This is at least 19% lower than the financial sector weights of the benchmark and category average.

Size

% of Portfolio

Benchmark

Category Average

Financial Services

1.63

24.10

24.57

Healthcare

8.33

12.15

13.68

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Additionally, the fund has a decided advantage in the consumer defensive sector. This can be seen below.

Size

% of Portfolio

Benchmark

Category Average

Consumer Defensive

19.15

7.94

10.16

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It is worth noting that six of the fund's top 15 holdings come from the consumer defensive sector. The consumer defensive holdings and their performances can be seen below. However, this is further evidence of the fund's strong position against the downside.

Equity Holding

Portfolio Weight

YTD Return

Kellogg Co. (NYSE:K)

2.04%

4.82

Campbell Soup Co. (NYSE:CPB)

2.02%

16.48

Kimberly-Clark Corp (NYSE:KMB)

1.89%

2.51

Coca-Cola Co. (NYSE:KO)

1.76%

1.23

PepsiCo Inc. (NYSE:PEP)

1.74%

-0.37

Proctor & Gamble Co. (NYSE:PG)

1.66%

4.66

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The upside and downside capture ratios underscore the current issues with this fund that was mentioned earlier in the piece. The following chart shows the fund's current upside and downside capture ratios. These statistics are illustrative of a fund that is quite sturdy against the downside. When it comes to the upside, this fund fails miserably. This can be seen in the negative upside capture ratio in the chart below:

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The fund's expense ratio only serves to diminish the attractiveness of this fund. The Hussman Dividend Strategic Dividend Value Fund's expense ratio outpaces the category average and median of the fee level comparison group.

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BOTTOM LINE

Given the Hussman Dividend Strategic Dividend Value Fund's stellar performance in this bear market, the fund warrants a closer look depending on one's specific investing preference. However, I will not give the fund a blanket endorsement at this time. There is no doubt that this fund is set up very well against downside risk. And while this current bear market could extend for the foreseeable future, this fund's return is too anemic for my liking in bullish markets. This can be seen in the fund's negative 1-year upside capture ratio.

Clearly, this fund is not set up for the upside if and when this bear market should come to a close. It does not help that the fund's attractiveness is reduced by its above-average expense ratio.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.