Barron’s Weekend Summary: Cover feature profiles legendary investor Peter Lynch; stories look back on 2019 and ahead to 2020
* Cover story: Profile of legendary investor Peter Lynch, who at age 75 has spent 50 years at Fidelity, where he holds one of the greatest track records—an astonishing 29% annualized return from 1977 until 1990—nearly double what the S&P 500 index produced in the same period; He says investors should buy stocks regardless of whether the market is rosy or bleak, and that “The thesis underlying everything, whether you’re an actively managed fund or a passive fund, is that the US will be OK. If you don’t believe that, you shouldn’t be in the stock market.”
* Tech Trader: The column looks back at the calls it made in 2019—some good, some bad—and says the major story of the year was Big Tech coming under antitrust scrutiny, with the competitive practices of AAPL, AMZN, FB, and GOOGL facing regulatory investigations.
* Trader: There are just six trading days left in 2019, and the market doesn’t seem to be able to stop going higher—but the year’s gains were possible only because the market entered 2019 positioned for a recession and instead got a “muddle-through”; Cautious on BBBY: Columnist Ben Levisohn says he regrets a call to short the stock after the company named Mark Tritton chief executive—it still has a lot of work to do, and while he doesn’t recommend buying, nor does he suggest shorting it; Many companies are using “reverse factoring”—the market for supply chain financing has been growing quickly, and the debt is making its way into funds offering yield, though accounting rules don’t say much about how it should be reported.
* Profile: Sam Hutchings and Mark DeVaul, portfolio managers at American Beacon The London Company Income Equity fund, seek outperformance by targeting market inefficiencies around risk, rather than reward, and select companies based on estimated worth in a weak economic environment (top 10 holdings: AAPL, CINF, Berkshire Hathaway, MRK, WFC, TXN, CSCO, D, NSC, DEO).
* Features: 1) In an interview, Peter Lynch says that “Growth stocks are better than non-growth stocks. Growth stocks, by definition, are where sales have really grown. People confuse it with earnings going up, but if you just look at earnings growth you mix in turnarounds and cyclicals”; 2) Cautious on CHL: The leader in the Chinese wireless market has 946M mobile customers, 10 times those of VZ and T and almost three times the US population, with more than $100B in annual sales—but that size hasn’t translated into stock performance; 3) “The most sweeping changes to the US retirement system in more than a decade have passed Congress and are widely expected to be signed into law before year’s end, leaving little time for pre-retirees and current retirees to digest a spate of new rules that are aimed at increasing Americans’ access to work-based retirement plans and helping their savings last longer”; 4) Positive on BDX: A strong US dollar has pressured the company’s earnings, and there is regulatory concern about its drug-coated Lutonix balloon for treating patients with peripheral arterial disease, but these hurdles may be causing investors to overlook a solid company with a healthy business that generates robust cash flow.
* European Trader: An overview of Europe in 2019 says it’s been a mixed year for the Continent, “which saw Germany’s powerhouse economy flirt with recession and the United Kingdom divided by uncertainty over Brexit”—and while European earnings overall have been downgraded over the year, the market has had pockets of strength.
* Emerging Markets: Most of the events that dominated emerging markets in 2019 were made in the US, including the Federal Reserve’s shifting mood on interest rates and Donald Trump’s unpredictable turns on trade with China.
* Commodities: “This year has been good for commodities, with palladium leading the way with a gain of nearly 60%—the precious metal has continued to notch new highs, stealing the spotlight from cheese and milk prices.”
* Streetwise: Columnist Jack Hough looks at the decade’s 10 highest-returning S&P 500 stocks: NFLX, MKTX, TDG, AVGO, ABMD, URI, REGN, ULTA, ALGN, and ODFL.