Seeking Sustainable Companies with Lower Risk Amid a Volatile Market

The Portfolio Managers of the Hennessy Stance ESG ETF discussed the volatile market, how the ETF was positioned, portfolio changes, new holdings, and sector weightings.

April 2025
  • Kyle Balkissoon
    Kyle Balkissoon
    Portfolio Manager
  • Bill Davis
    Bill Davis
    Portfolio Manager

Key Takeaways

»    Over 60% of the S&P 500 stocks outperformed the overall Index, indicating a strong environment for security selection.
»    The ETF has a 3-year beta of 0.87 relative to the S&P 500 Index as of March 31, 2025.
»    Two new positions include an Industrials business, Hubbell International, and General Mills, a Consumer Staples company.
»    The top three sector weightings were Health Care, Consumer Discretionary, and Financials as of the end of the first quarter of 2025.

What are your thoughts on the volatile market over the first few months of 2025?

It was a volatile first quarter for the S&P 500 Index, as tariff discussions increased investor uncertainty in the economy and overall stock market. The S&P 500 declined 4% and the average stock fell 0.50%. However, 62% of securities outperformed the overall Index, indicating a strong environment for active security selection.  

How was the Hennessy Stance ESG ETF positioned during this volatile period?

As part of our active management investment process, the Hennessy Stance ESG ETF seeks companies that are most likely to outperform both in absolute returns as well as in risk-adjusted returns over the next quarter. We believe this focus led the portfolio to have a lower beta of 0.87 relative to the S&P 500 Index over the past 3 years as of March 31, 2025.
In our process to optimize the portfolio, we leaned heavily away from market risk in the first quarter, with underweight sector positions in Technology and Communication Services and an overweight in Utilities. 

As the largest 10 companies in the S&P 500 make up a growing share of the Index, STNC—which more closely tracks the S&P 500 Equal Weight Index—tends to perform differently from the traditional, market cap-weighted S&P 500. 

What were the portfolio changes in the quarter and would you discuss a few new additions?

The ETF is rebalanced every quarter, and we continue to seek companies that have a lower beta than the overall market. Among our new positions, we have added an Industrials business and a Consumer Staples company. The new position in the Industrials sector is Hubbell Incorporated, which designs, manufactures, and sells electrical and electronic products for non-residential and residential construction, industrial, and utility applications. Despite the ongoing tariff situation, we see upside in this position due to Hubbell’s strong earnings momentum. 

Another new position is U.S.-based food company, General Mills. We believe General Millers is a strong defensive addition to the ETF, as it has paid a 4% dividend, and has significant pricing power due to  its scale.

How have the ETF’s sector weightings changed over the past year?

Our sector weightings change each quarter based on our approach to minimizing tail risk. As of the end of the first quarter of 2025, the top three 
sector weightings were Health Care, Consumer Discretionary, and Financials.

Over the course of the past year, the ETF has generally held an overweight position in the Health Care and Industrials sectors. We’ve increased the ETF’s exposure to Financials and more recently, Utilities. The ETF tends to have underweight positions in Technology and Communication Services.

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