Hulbert: Sentiment a Good Sign for Contrarians

In an article for MarketWatch, columnist Mark Hulbert reports that “the typical stock-market timer remains extremely pessimistic. That, according to the contrarian’s logic, is a good sign.” Hulbert explains that, from the contrarian point of view, continued skepticism in the market is a good thing. He notes at the time of the article (last December), the average recommended equity exposure as measured by the Hulbert Stock Newsletter Sentiment Index (HSNSI) stood at -15.6%, one of… Read More

Tips for the Contrarian Investor

“Being a contrarian for the sake of being contrarian,” says a recent Morningstar article, “is as likely to lead you to investment errors as it is to get you booted off invitation lists for parties.” The article offers insights regarding how a contrarian investing strategy can work best, noting, “the key is to identify environments where market efficiency drops—that is, when investors are behaving irrationally. As valuation-driven investors, we base that identification process on fundamentals… Read More

Investors Who Dare to Be Different Stand a Better Chance for Success

By John P. Reese In 2006, Oaktree Capital co-chairman Howard Marks wrote a memo titled Dare to Be Great in which he delivered a simple but provocative statement about investing: “This just in: you can’t take the same actions as everyone else and expect to outperform.” Being different, he argues, is “absolutely essential if you want a chance at being superior.” Going against the herd, however, runs counter to human nature and can be exceedingly… Read More

Fundamentally Strong Picks for the Contrarian Investor

The Citigroup Economic Surprise Index, which measures how current economic data is comparing to expectations, is on the rise along with investor confidence regarding the expanding economy, writes Validea CEO John Reese in a recent article for Forbes. Historically, however, markets perform best not during times of economic expansion, but rather when the economy is improving despite lower expectations, writes Reese. When things are going relatively well, he argues, “forecasters tend to extrapolate forward using… Read More

A Contrarian View May Be in Order

The seven-year-old bull market that started in the aftermath of the financial crisis could be facing a shift over the next five years, says Validea CEO John Reese in last week’s Globe and Mail. Reese suggests that such a shift could include a resurgence of emerging markets and trends favoring cyclical, value and small cap stocks over defensive, growth and large cap names. “Investors appear to be betting that economic growth has the potential to… Read More