Fund Sells Equitable Holdings Amidst AI Boom

In its second-quarter 2026 investor letter, the Hennessy Equity and Income Fund detailed a strategic divestment from Equitable Holdings, Inc. (NYSE:EQH). The decision to sell the financial services company's position was triggered by a soft stop-loss review and a lack of insider buying, despite Equitable's consistent cash flow generation. The fund noted concerns regarding Equitable's inconsistent core business, uneven earnings quality, mixed investor flows, and ongoing pressures in its life insurance and retirement segments. Although Equitable's valuation appeared attractive, the fund's confidence in its consistent performance and turnaround execution diminished.

Meanwhile, the broader market saw a reversal in U.S. equities, significantly boosted by AI spending and strong corporate earnings. The Hennessy fund's portfolio businesses demonstrated superior performance, achieving a 23.0% pre-tax return on invested capital compared to the S&P 500's 16.1%. This outperformance underscores a strategic focus on high-quality companies with durable advantages, anticipating positive outcomes as valuation pressures mount. The fund aims to leverage overlooked valuations in quality companies, suggesting future market success may depend more on fundamental strength than speculative trends. Investors seeking greater upside potential are also being directed towards AI stocks, with certain options presented as offering less downside risk.