Is the Next Peter Lynch or Warren Buffett Waiting in the Wings as Value Emerges

Bloomberg reports on the market shifts toward value as “returning to an era when stock pickers reigned,” drawing on comments by Bank of Montreal’s Brian Belski, who said “it’s a Warren Buffet or Peter Lynch-type world where you buy good companies and stick with them.” As Bloomberg puts it, Belski’s comments reflect that “the current climate recalls the 1980s” when Lynch’s record with Fidelity and Buffet’s success “rose to fame.” The article notes, “an index of value stocks in the [S&P 500] has seen a jump of more than three times that of its growth-oriented counterpart since the start of February,” which is “the widest margin of outperformance for the value group since April 2014. It also points to the Chicago Board of Options Exchange index, which “uses options to measure expectations of how much U.S. equities will move in unison,” and registered a significant drop from February to early March. John Carey of Pioneer Investment Management, Inc. says, “it’s a market in which one needs to be selective,” suggesting that “it becomes important to identify the high-quality stocks with stable financial characteristics.” Bloomberg notes that “about 90 percent of active money managers have beaten the Russell 2000 Index so far in 2016, compared to just 43 percent over the last 10 years,” and similar results can be seen using the Russell 1000 and 3000 indexes as benchmarks. Bridgewater Associate’s Ray Dalio commented that rather than betting against active managers, the environment suggests creating a “good strategic asset allocation mix that is a balanced portfolio.”