How then, did one outperform the other by nearly 120% since 2009?
We are not talking a few percentage points or even double-digit differentiation through stock selection, and it is not like one fund bet everything on one stock Yacktman's largest position is 9%, Hussman's is 3%. Essentially, Yacktman doubled his fund while Hussman lost money.
Where is the difference then? It seems that Hussman sold calls on equity indices which more than offset his long equity positions. The nearly 30% short/macro hedge is now the single largest position that, now way in the money, is an outright short position in us equities. This contributed to his fund losing more than 11% in 2012. An expensive hedge indeed. The ironic thing is that Hussman is the fund which adds the capital protection component and describes a strategy that combines valuation with market action.
On the other hand, Yactkman focuses far more on company-specific factors such as high market share and and cheap purchase price. Indeed, there is little mention of the overall economy and more elaboration on what he defines as a "good business." He keeps things simple, buying good companies at good prices.
My view: Hussman doesn't believe he is trying to time the market, but he is. The fact that he sends out weekly commentary is a pretty short term viewpoint, and far more importantly, his market positioning is short term - using options (especially selling calls) is by definition a time-dependent vehicle. It doesn't matter if they are long dated options - there is an inherent path/time dependency risk he is taking and he could be "right" and still lose too much capital before. His arguments, on the other hand, don't have have a time-dependent path to resolution - i.e. risk assets are overbought, but when will then come down then?
Then again, he has been around longer than most of us have been active (fund at least since 2000) in the markets. Perhaps Hussman will have his day?
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