ContrarianInvesting posts
FeedPosted Feb 18th 2009 12:55PM by Sheldon Liber (RSS feed)
Filed under: Forecasts, Other issues, Rants and raves, Competitive strategy, General Electric (GE), Berkshire Hathaway (BRK.A), Johnson and Johnson (JNJ), Tiffany and Co (TIF), Goldman Sachs Group (GS), Procter and Gamble (PG), Harley-Davidson (HOG), Recession, Financial Crisis
Continue reading Buffett says buy, then sells, Roubini says wait -- what's an investor to do?
Posted Nov 25th 2008 2:25PM by Steven Halpern (RSS feed)
Filed under: International markets, Newsletters, Commodities, Stocks to Buy
"Among contrarians, one advisors stands out among all others: David Dreman," notes John Reese, editor of the Validea newsletter.
His advisory service selects stocks based on the strategies of time-tested investors, he reviews Dreman's approach and offers one stock that matches the contrarian's investment profile -- specialty metals firm, Allegheny Technologies (NYSE: ATI).
"Dreman, perhaps more than any other guru I follow, is a student of investor psychology. And at the core of his research is the belief that investors tend to overvalue the 'best' stocks -- those 'hot' stocks everyone seems to be buying -- and undervalue the 'worst' stocks -- those that people are avoiding like the plague.
"In addition, he also believed that the market was driven largely by how investors reacted to 'surprises', frequent events that include earnings reports that exceed or fall short of expectations, government actions, or news about new products.
"And, he believed that analysts were more often than not wrong about their earnings forecasts, which leads to a lot of these surprises. By taking a contrarian approach -- i.e. targeting out-of-favor stocks and avoiding in-favor stocks -- Dreman found you could make a killing.
"To find out-of-favor potential turnarounds, he compared a stock's price to four fundamentals: earnings, cash flow, book value, and dividend yield. Because Dreman took advantage of the overreactions of others, he found that one of the best times to invest was during a crisis.
"Allegheny Technologies is a diversified specialty metals producer; its metals are selected for use in environments that demand metals having hardness, toughness, strength, resistance to heat, corrosion or abrasion, or a combination of these characteristics.
Continue reading Allegheny Technologies (ATI): A 'Dreman style' contrarian buy
Posted Sep 2nd 2008 11:00AM by Steven Halpern (RSS feed)
Filed under: Newsletters, Bargain stocks, Stocks to Buy
"At the Morningstar Investment Conference, I had a chance to hear directly from manager of several of our 'best buy' funds," says fund expert Mark Salzinger.
In his The No-Load Fund Investor, he discusses a pair of "contrarian" funds: Dodge & Cox Stock (DODGX) and T. Rowe Price Equity Income (PRFDX) recommended for long-term investors.
Salzinger explains, "The managements of these equity funds are sticking to its guns. In the case of Dodge & Cox Stock, this means a continuation of a contrarian focus on large out-of-favor stocks. often in equally out-of-favor sectors.
"In the case of T. Rowe Price Equity Income, this means a continuation of focus on high quality companies that appear historically cheap based on various levels of valuation, including their dividend yield relative to the market.
"Charles Pohl, the chief investment officer of Dodge & Cox and a member of the portfolio management team on DODGX, spoke strongly about what he considers to be the attractive opportunities in financials now that the sector is so out of favor.
"He says that the Dodge & Cox team is focusing on intense analysis of companies within subsets of the financial services industry, looking for stocks that have been beaten down with their peers despite superior operations, including safer historical underwriting standards.
Continue reading Best buys among contrarian funds
Posted Aug 27th 2008 1:40PM by Steven Halpern (RSS feed)
Filed under: International markets, Newsletters, Commodities, Oil, Stocks to Buy
"We are moving headlong into oil," notes John Reese, who analyzes stocks based on the criteria used by "legendary" investors such as Buffett, Graham and Lynch.
In his Validea newsletter, he says, "My fundamental models indicate that the oil industry is where the best values in the market are." Here's a look at W&T Offshore (NYSE: WTI), which is based on the criteria used by contrarian David Dreman.
"The economy and stock market have gone through a legitimate crisis because of the credit woes, and it takes time for something like that to work itself out.
"But the important thing to remember is that we've been through financial crises before -- even bad-debt financial crises like this one -- and the market has always stabilized and then pushed higher.
"And history has shown that those who can stick with the stock market through down times like these will be rewarded.
"David Dreman -- one of the gurus I base my strategies on -- notes in his recent Forbes column, 'If you pack up now, chances are you'll miss a good part of the next bull market. A large part of the gains are always made in the first few months of one, when market-timing investors are still on the sidelines.'
Continue reading W&T Offshore (WTI): Drilling with David Dreman
Posted Jul 22nd 2008 4:43PM by Aaron Katsman (RSS feed)
Filed under: Earnings reports, Good news, Apple Inc (AAPL), Texas Instruments (TXN), Technology, Earnings transcripts
So the sky isn't falling.
Corporate earnings aren't that bad and are surprising analysts. Oil prices are falling just as quickly as they rose. If you are a contrarian investor, you must have a big grin on your face.
Common wisdom had it that markets were going to keep dropping, that the price of crude would hit $200 a barrel, and that bank after bank would go bankrupt. But what's happened? The opposite. Bank earnings aren't as bad a feared, crude has fallen to under $130 and suddenly investors are a bit more optimistic.
Even when we get bad news, like earnings from Apple (NASDAQ: AAPL), Texas Instruments (NYSE: TXN) and others, the market is able to hold up. Industries that just a week ago were being left for dead suddenly came roaring back to life. For investors who like to dabble in out of favor stocks, this market is a dream come true. Battered sectors such as financials, airlines, and even autos have surged over the last week. Who would have dreamed that airline stocks would actually stage a rally? What's interesting is that even with their recent move these sectors are all still trading significantly off their highs, meaning that potentially we have much more room to run.
Continue reading This is setting up to be a contrarian's dream market
Posted May 7th 2008 1:30PM by Steven Halpern (RSS feed)
Filed under: Newsletters, Mutual funds, Stocks to Buy
"Right now, we have a rare opportunity to get paid a monthly double-digit dividend and buy the skills of a legendary investment manager for only 85 cents on the dollar," says Dr. Steve Sjuggerud.
Here, in Daily Wealth, the advisor takes a look at David Dreman -- -- noted contrarian advisor -- and the opportunity currently offered in his closed-end fund, Dreman Value Income Edge Fund (NYSE: DHG).
"David Dreman made one of the greatest calls in stock market history. In 1980, he told investors to buy stocks. He didn't just tell a few clients or friends to buy stocks.
"He literally wrote the book on buying stocks in 1980 -- Contrarian Investment Strategies in which he argued, 'The stock market appears cheap by nearly every historical standard.'
"At the time, saying 'buy stocks' was bold stuff. Stocks hadn't made money in 17 years. But Dreman was absolutely right. After 17 years of losses, the stock market started the longest bull run in recorded history, which stretched from 1982 until 2000.
"Fast forward to 2008. Dreman is guarded, but optimistic again. In the May issue of Forbes he says: 'Frightening as the markets look today, there will come a time when the liquidity crisis ends and today's prices for bank stocks look, in retrospect, like bargains.'
Continue reading David Dreman: Value manager trades at a discount
Posted Mar 31st 2007 1:10PM by Zac Bissonnette (RSS feed)
Filed under: Newspapers, Books
Whenever I see a list of contrarian stock picks, I'm reminded of the Yogi Berra witticism about a popular restaurant: "Nobody goes there anymore because it's too crowded."
A list of stocks to buy because no one is interested in buying them seems paradoxical, but the methods that the Wall Street Journal used to compile its list of contrarian stocks [subscription required] are interesting: Stocks that have lagged the market for six months but have made sizable gains in the past week, have manageable debt levels, solid profits, negative analyst ratings, and PEG ratios below 1.5.
That's a pretty good screen for finding beaten down stocks, and I'm going to try to find a site that will allow me to input all of that into a stock screener. Anyone with any suggestions, please leave a comment.
And to learn more about contrarian investing, I recommend David Dreman's Contrarian Investment Strategies.