Reviewing Peter Lynch's "Blossoms In The Desert"

In partnership with

While somewhat overshadowed by One Up On Wall Street, Peter Lynch’s Beating the Street is another fantastic book about investing. Often considered one of the best investors of all time, Peter Lynch delivered an annualized return of 29.2% over a 13-year period.

Beating the Street gets into technical details about specific investment strategies Lynch used, one of which is the concept of buying "Blossoms in the desert."

This is the idea of buying a great company in an industry that’s unpopular, slow-growing, or even “weird” or “gross.”

As Lynch explained, “I’ll take a lousy industry over a great industry anytime. In a lousy industry, one that’s growing slowly if at all, the weak drop out and the survivors get a bigger share of the market. A company that can capture an ever-increasing share of a stagnant market is a lot better off than one that has to struggle to protect a dwindling share of an exciting market.”

Lynch then provided nine examples of "great companies in lousy industries."

1. Sun Television and Appliances

2. Southwest Airlines

3. Bandag

4. Cooper Tire

5. Green Tree Financial

6. Dillard

7. Crown Cork & Seal

8. Nucor

9. Shaw Industries

Interestingly, almost all of these businesses are still around!

With the exception of Sun Television and Appliances, which went bankrupt in 1998 after a failed merger, and Green Tree Financial, which was acquired by a company that later went bankrupt, these businesses are still alive and well.

Goodyear bought Cooper Tire in 2021.

Bandag was acquired by Bridgestone Corporation.

And Shaw Industries was purchased by Berkshire Hathaway.

Of the remaining independent and publicly traded stocks, today’s special report will focus on three companies:

1. Dillard's, Inc. ($DDS)

2. Nucor Corporation ($NUE)

3. Crown Holdings, Inc. ($CCK)

Here’s what Peter Lynch had to say about each business, and here’s how every one of these three businesses is performing today…

Dillard's, Inc. ($DDS)

Dillard's, Inc. owns and operates department stores in the southeastern, southwestern, and midwestern areas of the United States. Department stores probably aren’t a business you’re interested in investing in. And the sector is known for its terrible performance.

Macy's, Inc. is down -64.89% over the past decade. And Kohl's Corporation is down -67.22% during that same timespan.

Meanwhile, Dillard's, Inc. delivered a market-beating 10-year average annual total return of 23.70%. With dividends reinvested, this retailer achieved a total return of 739.63% since October, 2015.

Better returns than Walmart or Amazon.

According to Peter Lynch, Dillard's success stemmed from three things.

The first, the owners “search the books looking for new ways to cut costs, but not at the expense of employees.” As a result, Dillard's has very little debt on its balance sheet.

The second, “The Dillards caught on to computers very early, not only to keep track of the money, but also to manage the merchandise.“ Even back in 1994 this was a data-driven company that relied on facts and numbers to determine what would, or wouldn’t, sell.

And the third, “Dillard has stayed away from the glamour markets where the larger retail chains stumble over one another. Dillard stores are found in small towns and cities like Wichita and Memphis. As the glamour chains (Federated, Allied, Macy) restructure or go bankrupt, Dillard expands by buying some of their discarded divisions and hooking them up to the Dillard computers.”

Nucor Corporation ($NUE)

Nucor Corporation manufactures and sells steel products.

The company produces hot-rolled steel, cold-rolled steel, galvanized sheet steel, plate steel, and wide-flange beams.

Like department stores, steel is one of those industries that most investors tend to ignore. Steel manufactures get little attention, and when they do appear in the press it’s usually because a firm is going bankrupt or facing financial difficulties.

As Peter Lynch explains, “[I]f you'd gotten into Nucor for $1 a share in 1971, you'd now be convinced that steel is one of the greatest businesses of all time. You wouldn't think so if you'd bought Bethlehem for $24 a share in 1971, because now you'd have $13, the sort of result that gives investing in Treasury bills a good name.“

Nucor is still beating the market.

Over the past 10 years, Nucor delivered an average annual total return of 16.21%.

With dividends reinvested, this company delivered a 349.45% total return since 2015.

In other words, a legacy steel-maker founded in 1905 outperformed high-flying stocks like Starbucks and Nike.

Lynch attributes this success to several factors.

The company focuses on using money wisely as opposed to funding lavish lifestyles for its corporate executives. “There is no executive dining room at Nucor, there are no limos in the parking lot, there is no corporate jet at the airport, and there are no special privileges for wearing a suit — when profits decline, the people in the suits and the people in the overalls both take home less pay. When profits increase (as they usually do), everybody gets a bonus.”

Additionally, this company looks for unique ways to develop a competitive advantage.

As Lynch explains, “Nucor has had two niches in its history. In the 1970s it specialized in turning scrap metal into construction-grade steel. Lately, as other companies have caught on to this process, Nucor has kept a step ahead of them by learning to produce a high-grade, flat-rolled steel.“

Crown Holdings, Inc. ($CCK)

Crown Holdings, Inc., formerly named “Crown Cork & Seal Company,” makes aluminum beverage and food cans.

The company produces roughly one out of every five beverage cans used around the world and one out of every three food cans used in North America and Europe. And while this is an essential business that makes 5-6 million beverage cans every single day, Crown Holdings, Inc. is not a market-beater.

In fact, this stock has lagged the S&P 500, delivering a 10-year average annual total return of just 7.90%.

As Peter Lynch observes, “[C]an making is a lousy industry with a thin profit margin.“

However, Crown Holdings, Inc. keeps its non-business expenses low. “Profits that weren't reinvested in improving the can-making operation were used to buy back shares. This boosted the earnings for the remaining shares, which boosted the share price for the lucky shareholders who hadn't sold. You'd almost have thought that Mr. Connelly [the CEO] was working for the shareholders, which at many companies is an eccentric thing to do.”

In more recent years, Crown Holdings has also begun paying a dividend.

The firm raised its dividend by 10% in 2022, 9.1% in 2023, 4.2% in 2024, and 4% this year.

Crown Holdings isn’t a market-beater. But, the firm produces millions of cans and containers every single day. And, the company is committed to rewarding shareholders through dividend payments and stock buybacks.

7 Actionable Ways to Achieve a Comfortable Retirement

Your dream retirement isn’t going to fund itself—that’s what your portfolio is for.

When generating income for a comfortable retirement, there are countless options to weigh. Muni bonds, dividends, REITs, Master Limited Partnerships—each comes with risk and oppor-tunity.

The Definitive Guide to Retirement Income from Fisher investments shows you ways you can position your portfolio to help you maintain or improve your lifestyle in retirement.

It also highlights common mistakes, such as tax mistakes, that can make a substantial differ-ence as you plan your well-deserved future.

Download your free copy today.

Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.