Strategies

Contrarian

Contrarian strategies are strategies that go against the crowd (they do the opposite of whats popular at the time)

More About Contrarian

Contrarian Strategies Common With Resource Investing
  • Wide commodity price swings and cycles contribute to this
  • The world requires commodities - companies and industries are unlikely to disappear
    • If prices are low and companies are hurting, prices will eventually right themselves
    • The companies can't all go bankrupt or the world still stop functioning

Contrarian strategies are easy in hindsight, but hard to implement
  • Physiologically humans are include to follow the herd (it's in our DNA)
  • Going against the herd makes us feel uncomfortable (even if its logical)
  • It's hard to be a contrarian in practice when things are going the opposite direction
  • Often the herd makes contrarians feel like they will miss out or get crushed

Contrarians Look For Companies & Industries That:
  • the herd finds boring or fallen out of favor
  • the heard hates (better than boring)
  • have been forgotten
  • that are needed by the world/economy and likely won't disappear (natural resources)

Contrarians Looks at Leading Indicators to help understand when a market turns
  • When an industry is out of favor or depressed, generally only the strongest companies & management teams survive
  • Investing at this time ensures you'll invest in a good company / management team (there are few/no bad ones)
  • On the other hand, investing when an industry is hot and popular gives you less favorable odds of investing in a good firm or team
    • When industries are hot, lots of companies start operating in the industry
    • With lots of peopel operating and a strong industry tailwing, it's hard to tell who are the best companies nad managemnet teams
    • Your odds of picking a good one are lower than when an industry is depresses and only the strong remain

Contrarian Jokes
  • Everyone tries to be a contrarian when it's popular