John M. “Jack” McCarthy, who became a widely quoted stock market bull during a 32-year career at Lord Abbett & Co., where he managed the flagship Affiliated Fund (LAFFX), has died. He was 85.
He died on Jan. 23 at Lenox Hill Hospital in New York City following a brief illness, his son, Stephen McCarthy, said today in an interview. McCarthy lived in Manhattan.
From his start in 1960 as a research analyst, McCarthy rose to chief investment officer and then, in 1983, co-managing partner of Lord Abbett -- then located in New York, now based in Jersey City, New Jersey.
He was for many years the manager of the Affiliated Fund, which, according to the firm, invests in undervalued companies and has an average annual return of 10.8 percent since 1950. The fund had $6.4 billion under management at the end of 2012.
“He was known as a great optimist, a raging bull, a contrarian, always looking for outward signs of change in the markets,” Stephen McCarthy, who helps manage the family's investments as senior vice president of New York-based KCG Capital Advisors, said today in an interview.
Forbes magazine, in a 1982 article, described McCarthy as one of Wall Street's “lonely bulls” in a period of “doom and gloom,” when the Dow Jones Industrial Average (INDU) had dropped below 800 for the first time in two years.
“Everyone says they buy on weakness, but I do it,” McCarthy said, according to Forbes. He said he based his optimism in large part on inflation projections: “When people perceive that inflation is under control, the Dow isn't going to stop at 1000. It'll probably keep going to 3000.” The index closed above 3000 for the first time nine years later, in 1991.
Rather than focus on mathematic models, McCarthy relied “on common sense and a bit of his Brooklyn Irish-Catholic upbringing” in making his market calls, the Wall Street Journal wrote in a 1980 profile. “There's always something undervalued,” McCarthy told the newspaper. “We tend to be in out-of-favor industries nobody wants to own.”
McCarthy adjusted the fund's investments based on expected economic conditions 12 to 18 months in the future.
“To be very successful, you only have to make four major calls in a decade,” he said, according to a 1987 article in Changing Times magazine, now called Kiplinger's Personal Finance.
“Affiliated has generated good though unremarkable returns with its strategy, averaging 19.1 percent annually the past decade,” Changing Times said in the article. “Since 1976, it hasn't beaten the S&P 500 by more than 11 points nor trailed it by more than 8,” and only in 1977 “did it fail to produce a positive return,” the magazine said.
McCarthy retired in 1992. In a death notice published in today's New York Times, the firm wrote:
“Jack was an effective and inspiring leader who embodied the values of integrity and stewardship on which our firm was founded. His passion for the market, combined with his unique communication skills and colorful personality made him a legend within the financial adviser community.”
John Michael McCarthy was born on April 9, 1927. After serving in the U.S. Army during World War II, he obtained a bachelor's degree in economics in 1951 from St. Francis College in Brooklyn, New York, and a master's in business administration in 1953 from New York University.
He worked as a trust officer at First National City Bank from 1951 to 1959, before joining Lord Abbett. He became research director and a partner in 1972.
A 1973 newspaper advertisement publicizing a presentation by McCarthy in Deland, Florida, described him as portfolio manager for $1.7 billion in investments and “one of Wall Street's most respected gentlemen.”
In addition to son Stephen and his wife Kathleen, survivors include McCarthy's wife, the former Mary Hickey; his twin sister, Sister Mary Eileen McCarthy; a brother, James McCarthy; another son, Neil, a senior money manager at OppenheimerFunds Inc. in New York, and his wife Elizabeth; daughter Tara and her husband Orrin; daughter Laurette and her husband Harold; and three grandchildren, MaryKate, Kevin and Kaitlin.