Top Manager Borrowing From the Peter Lynch Playbook

Putnam manager Jerry Sullivan takes a three-pronged approach to picking stocks, including approaches reminiscent of Fidelity’s Peter Lynch, with whom Sullivan began his career. As a student intern 30 years ago, Sullivan caught Lynch’s eye and was offered a permanent position with Fidelity. He turned it down, but his approach to managing Putnam funds includes elements that suggest he learned a lot in those early days.

Sullivan’s Putnam Multi-Cap Core fund has returned an annualized 15.8% over five years, placing it among the top 3% of its peers, although it has under-performed in the last year. As a manager, he divides stocks in his fund into three categories. The first is stocks he has researched in the past. Like Lynch, he spends a few minutes each week reviewing these companies, “looking for a change in the fundamentals, however subtle, that could move the stock one way or the other.” Second, in a technique learned from Lynch, Sullivan watches for insider buying. Noting that American Eagle Outfitter’s interim CEO is buying the company’s stock, for example, he added to his position in the company despite its recent declines. Third, he studies initial public offerings closely, seeing them as an opportunity to “ask deeper questions” of the company than usual because “it is like no other time in the history of that company, because they need me more than  I need them.” Overall, Sullivan says, “whether it’s a value name or a growth story, I’m fascinated by what could move the stock.”