Dennis Lynch – Delivering Alpha in Adapting Markets Podcast Recap

Dennis Lynch, who grew up in Rumson, New Jersey, was featured on the Invest Like The Best podcast with Patrick O’Shaughnessy to discuss his unique approach to building a research team with Morgan Stanley, how misclassifications of companies often lead to the best opportunities, and how he has evolved his investing process over the years.

The conversation begins with O’Shaughnessy asking Dennis, who also goes by Marshall Lynch, for his advice for future investors. He presented Dennis with a scenario-based question, asking if he were teaching a class of 10 students who he knew he would hire to join his team after graduation, what would his syllabus look like? Dennis responded that he would present a list of books he deemed useful, like The Money Game or Moneyball. Dennis mentioned that learning a history of the markets and putting analytical skills to the test would be his approach.

Volatility In The Investment Market

Investment Market

O’Shaughnessy asked Dennis Lynch what he’s learned about volatility over the years. The New Jersey native said there is a huge difference between dealing with volatility in the private and public markets. He noted a quote by Warren Buffett, saying that it’s not about how smart you are as a public investor, but it’s about how you handle the volatility that comes with it. It can be challenging and emotional, he said. He referenced a day when he was presenting the topic of Facebook to a board with Morgan Stanley, and the stock for the company was up 20 percent at the time. The market had priced them higher than anticipated. He said you have to be in it with your clients for the long haul, so you have the opportunity to see the highs.

O’Shaughnessy asked if this was something you could get better at with time or train yourself to have a temperament that’s suited for this industry. Dennis said he thinks certain people are probably hardwired for it, while others might not be. He said it’s an emotional cycle and can affect your confidence levels as an investor over time. He said having experience helps, but you have to always remain open to the idea that you might be wrong one day.

How Earnings Power Relates To Business Change

Earnings Power

O’Shaughnessy asked Lynch about earnings power. He noted the connection between it and disruptive change research and asked Dennis Lynch what inputs he’s found to be effective over time. Dennis said that every company has a business model that can use historical and current analogies to get an idea of what the business’ profitability will be. He said a huge part of it is qualitative.

O’Shaughnessy asked him how often it occurs that a company change with earnings and classification of stocks drives incredible results versus simply maturing into a better unit. Dennis Lynch said if their top companies made specific investments over time without classifying them clearly, the analysis might have been flawed in the end. He said the dynamics that a business can deal with are the need to be valued in different ways.

Learning To Become An Advocate


After talking more about growth, value, and assessing the quality of a business, O’Shaughnessy asked the same question he asks all of his guests — what is one of the kindest things that someone has done for you? Lynch’s heartfelt reply was that his family found themselves in a major health crisis years back and found that when they were dealing with doctors and nurses at Rumson, New Jersey hospitals, a lot is going on at all times. He said that while there are so many who work in hospitals who have good intentions, sometimes you have to take control of your situation. He said he became a patient advocate of sorts and connected closely with a doctor who helped him feel comfortable with all the decisions he had to make. People who will go above and beyond will get far.

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