Money Managers Could Hardly Miss in '85, But Some Picks Proved Better Than Others
With the market enjoying one of its best years ever, one might imagine that money managers found it as easy to pick winning stocks as to shoot fish in a barrel.</br></br>On the whole that was true. For the first time in a few years, most money managers' stock portfolios in 1985 matched or surpassed the Standard & Poor's 500-stock index, which rose about 25%. The Nasdaq index of over-the-counter stocks gained about 30%. So it isn't surprising that the professional stock pickers featured early last year in The Wall Street Journal also look pretty good. But some did better than others.</br></br>At the end of 1984, we asked five investment managers to peer into their crystal balls and foretell which stocks and groups would likely be winners in 1985. The prophecies they shared with us don't necessarily represent a comprehensive investment strategy and so they're not reliable guides to the money managers' overall performance. Still, we thought it worth reviewing our report of their stock selections to see which worked out and which didn't.</br></br>Peter Lynch, who runs the Magellan Fund for Fidelity Management & Research in Boston, scored huge gains on six out of eight stocks he named. Like many investors, Mr. Lynch foresaw flat or declining interest rates in 1985, which led him to favor thrifts and some growth stocks. But his selections did much better than average, showing that stock picking is an art even in a bull market.</br></br>Mr. Lynch staked his money on little-known thrifts that had recently converted to stock ownership from operating as depositor-owned institutions. "It wasn't just an interest rate bet," he says. "I thought they would do better because the managers were now owners" of shares in a publicly traded company. "You had capitalism on your side," the money manager says.