NEW YORK (MONEY Magazine) - Call John Hussman a cautious optimist. The manager of the $1 billion Hussman Strategic Growth fund has plenty of money riding on some of America's biggest companies.

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But Hussman also worries that the stock market as a whole is grossly overvalued. So to protect against any sudden drops, he's using a complex hedging strategy to short -- that is, bet against -- major market indexes.

Hussman's four-year-old fund has been a solid performer, especially during the last bear market. But unlike some funds that bet on the short side, Hussman also managed to make some money in the 2003 upturn.

MONEY's Jonah Freedman asked Hussman to explain his take on the market and which stocks he thinks are still worth holding.

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