Fund managers do their best to serve the interests of their investors. Stock picking is a high-pressure job that requires a mix of data-centered thinking and bold speculation. And with the right approach, stock pickers can rise above the crowd, coming out on top in the race for returns.
That’s the story of Morgan Stanley’s Dennis Lynch, who also goes by Marshall Lynch.
Lynch managed some of the highest-returning mutual funds of 2020. His small-cap Institutional Inception fund returned 150% and Dennis Lynch’s Institutional Discovery fund also returned 142%. Compared to the S&P 500, which returned just 16% over the same period, that’s a monumental achievement.
It’s not a one-off fluke, either: as industry experts crunch the numbers, it’s expected for Dennis Lynch’s Institutional Inception fund to return 140% for 2021, too. Lynch credits his success to his alternative, growth-focused stock-picking style. Learn more about Dennis Lynch’s unique approach to stock picking and how he came out on the top of Wall Street.
Dennis P. Lynch, Jr. (Marshall) grew up in Monmouth County in Rumson, New Jersey. In 1993, he received his Bachelor of Arts in Government from Hamilton College. In 1998, Lynch earned his Master of Business Administration in Finance from Columbia University Business School.
Although he started his financial career as an analyst, he quickly rose through the ranks thanks to his unique, growth-centered approach to stocks. Since 1998, Dennis Lynch has continued to position Morgan Stanley at the forefront of returns-focused investments. Lynch is now the head of Morgan Stanley Counterpoint Global, managing over $130 billion in assets across several funds.
In 2020, The Wall Street Journal named Dennis Lynch as the best stock picker in the United States. He’s also been named as a Morningstar Fund Manager of the Year and has an AA rating with Citywire.
Overall, stock pickers performed about as well as index funds in 2020. But there were some outliers, and Dennis Lynch is one of them. With returns up to 150% for some of his funds, Dennis Lynch’s approach is all about growth potential. He isn’t interested in niche, size, or business model: if a business is growing and has the potential to be a disruptor, he’s in.
Lynch doesn’t believe in following strict parameters with his investments, either, and that’s why he’s been so successful. His methods are uncommon in an industry that’s guilty of siloing itself when it needs to think bigger. Learn how Dennis Lynch set up his Morgan Stanley funds to become some of the most profitable in the nation.
Stock picking shouldn’t be about blindly supporting particular industries or models for the sake of it. “Our level of conviction just isn’t as high as it was a year ago,” Lynch says.
Instead of limiting himself to a certain theme, like technology, Lynch chooses a more open-minded, big-picture approach. He and his team wait to see if the hype around stocks like Tesla are legitimate or if they’re just for show.
It means being patient, investing in a small but speculative fashion, and seeing how the stock performs. By waiting to see if there’s substance to trends, Lynch can avoid fads that don’t make his clients high returns in the long run.
When Dennis Lynch invests in a new venture, he and his team believe in taking measured risks. That means he’s willing to go in on alternative investments, like Bitcoin, as long as they hit the milestones his team needs to see for long-term returns.
Dennis Lynch takes a 10-year view with his investments. He and his team work with each business, crunching the numbers to make sure it’s hitting performance targets over time. If it doesn’t hit these targets and corrective action doesn’t fix it, Dennis Lynch pulls out of the investment.
With this approach, Lynch has been able to speculate while managing long-term risk. By making sure he’s investing in a long-term trend with promise, Lynch’s unique approach helps him get in early with companies that are poised to grow.
It’s easy to invest in an innovative company and assume that it will be the number-one innovator forever. But that’s never the case, which is why Dennis Lynch is always seeking out disruptions in the industries he invests in.
What trends are on the horizon? What are the company’s competitors doing? How is the industry changing? Is there legislation that will affect the industry?
Lynch encourages stock pickers to look for disruptors who will change the world. He looks for solutions that fundamentally change how businesses work, choosing disruptors like:
But Lynch also looks for disruptions to the disruptors, staying constantly vigilant in a world obsessed with innovation and change.
COVID-19 flipped the market upside down. With so much upheaval over the last two years, Dennis Lynch realized it was necessary to take a different approach. After all, what’s successful today might not be how we measure success in 10 years—which is why Lynch is such a big proponent of cryptocurrencies like Bitcoin.
Lynch credits his success to being open-minded. “What are you going to do with your money? We don’t see any great opportunity here in equities,” he explains. This is why Lynch navigates today’s tricky market with alternative investments in cryptocurrency like Bitcoin.
Many fund managers are still averse to cryptocurrencies, sticking with more proven investments. But Lynch predicts that crypto has the potential to shake up the market, and he wants a piece of the action when that happens.
Because of his open-minded approach, Lynch believes it’s important to look into private markets, too. While Lynch runs large portfolios, he makes sure they’re diverse with investments in small, private companies to hedge against uncertainty.
After all, corporations like Apple and Amazon have hit a ceiling on their growth. Growth is still possible, but not at the rate you see with small businesses. Small companies often allow investors to get in at a more favorable rate, leading to great gains—as long as you choose wisely.
Lynch looks at a company’s track record and leadership before investing. Instead of going after headline-grabbing, big-name corporations, he seeks out investments with the potential to grow.
After the economy bounced back spectacularly after the pandemic lockdowns, Lynch’s big bets on disruption reaped dividends. While Lynch considers himself a born and bred stock picker, Morningstar and the Wall Street Journal listed Dennis Lynch as one of the best stock pickers of 2020.
While luck is always a component of investing, Lynch’s measured approach to speculation has paid off in today’s uncertain market.