Now’s the time to buy, big fund firm says

The price-to-sales ratio for the 30 companies that comprise the Dow Jones Industrial Average is at its lowest point since 1996, making this a great time to get into the market, said Neil Hennessy, chief investment officer and portfolio manager for Novato, Calif.-based Hennessy Mutual Funds Inc. The last time the current price-to-sales ratio was this low was Nov. 13, 1996. Following that low-water mark was a significant market upturn that lasted until Jan. 14, 2000. The Dow Jones Industrial Average returned 97.34% or 23.92% annually during that stretch, according to Mr. Hennessy, who spoke at a press briefing in New York yesterday. The Dow’s current price-to-sales ratio is 78 cents, which means investors can purchase a $1 share in a company for that price. That’s down from a five-year reading of $1.18 and a 10-year ratio of $1.31. The sales-to-price ratio of the Hennessy Focus 30 Fund, which is comprised of a diverse group of 30 stocks, is also down to the bargain level of 68 cents, compared with a five-year ratio of 89 cents, he said. The fund was up 10% heading into September, before the Wall Street meltdown, but is now down 29.41% year-to-date. Another reason to believe the market is in for a turnaround is an estimated $4 to $6 trillion that institutional and retail investors have at their disposal to spend in the market. "There is a lot of cash sitting on the sidelines," Mr. Hennessy said. Hennessy had $1.1 billion in mutual fund assets under management on June 30.