What is Contrarian Investing?
It’s all about picking up stocks or sectors or commodities, which are not the flavour of the season. Typically, a contrarian investor would start by looking at all sectors and pick up the stocks that have underperformed. A detailed study will follow to explore various positive triggers that can drive up these scrips. For instance, technology stocks underperformed the market for most of 2007 due to concerns over the US economy and appreciation of the rupee. A contrarian investor, who bought Infosys at Rs 1,350 in March, had an opportunity to sell it at Rs 2,000 in June even as the Sensex remained flat around 15,000 levels. Similarly, when interest rates were falling last year, a contrarian investor looking at inflation figures would have expected interest rates to go up and invested in appropriate debt funds. Contrarian investing is not restricted to stocks alone, one can take a call on commodities, sectors, interest rates and currency as well. A contrarian says: “When the market sentim
Contrarian investing, means investing in these fundamentally strong, temporarily under-valued companies, in order to benefit when the market recognises their true worth. It is all about investing in a stock / sector when there is complete pessimism towards it of the market participants. Interestingly, such contrarian ideas / stocks would normally carry a low monetary risk, being significantly undervalued. However, time risk, is higher, depending on how long it takes for companies to effect and markets to perceive positive changes in fundamental attributes In the short-term, market sentiments may prevent the stock price of companies from correctly reflecting their intrinsic worth because: Temporary business / management issues may be interpreted as fundamental negative changes (eg, when hiccups in distributing a costly product constrain sales, or a crisis affects a companys goodwill.) Fundamental positive changes may not be recognised, but seen as temporary ups (eg, when earnings slack
Contrarian investing is a strategy that involves making investments based on factors other than market trends, projections based on past performance, and current industry indicators. Essentially, contrarian investing is choosing to make an investment that would generally be considered to run counter to the usual procedures of investing. This high risk mode of investing is usually entered into with the idea of getting in on a good deal before the rest of the investment world notices. While on the surface contrarian investing appears to be based more on instinct than factual information, this is rarely the case. Investors who wish to speculate in high risk ventures of this nature usually try to zero in on investment opportunities that are overlooked by others. For example, the contrarian investor may choose to focus on an industry that is not in favor right now, and make an investment in a company within that industry that is stable and doing very well. By choosing to invest in overlooke
March 22, 2009 Posted by SlashLane ( 0 ratings ) First off, lets define what it means to be a contrarian. A contrarian is a person who seeks to profit by investing money in a method that differs from the conventional wisdom. Take a look at Wikipedia for more information on what it means to be a contrarian, there is a lot of great information. A second definition on what a contrarian investor is: A contrarian is “one who takes a contrary view” with contrary defined as “being not in conformity with what is usual or expected.” Basically, a contrarian runs against the crowd. As for the most notable, famous and founding fathers of contrarian investing. Famous Contrarian Investors: Warren Buffett is a famous contrarian, who believes that best time to invest in a stock is when shortsightedness of the market has beaten down the price. David Dreman is a money manager often associated with contrarian investing. He has authored several books on the topic and writes the “Contrarian” column in Forb
