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Contrarian Investment Strategy

How to Identify Profitable Contra Investments using the Proven Contrarian Investment Strategy

by Holistic 1 Comment | Filed Under: Investments

Introducing Contra Investments

We are all familiar with the nuances and subtleties’ of “rowing against the tide” or “sailing against the wind”. Undertaking to do things which are in contrast to the usual is reflected in the above quotations. In the world of investments, when someone chooses to go against the prevailing market by buying assets which are not doing well and selling those stocks which are supposedly in the ‘pink of health’, the investor is practicing ‘contrarianism’.

What is Contrarian Investing?

Contrarian investor identifies contra investment opportunities and follows contra investing by using proven contrarian investment strategies. The contrarian may invest in ‘contra stocks’ as well as ‘contra funds’ which follow ‘the contrarian approach’.

Thinking behind Contra Investments

The profile of a ‘contrarian investor’ reflects the idiosyncrasies of a person who thinks differently. If a Bollywood cliché be borrowed to describe this tribe, then ‘contrarians’ belong to the ‘zara hat ke’ (removed from the normal) group of people.

This group of people who follow contra investing feel that when the market is going up it is because people are fully invested and no further purchasing power exists with them. On the other hand, when a downturn is predicted, people have already sold out their stakes, therefore at this point the market can only go up.

They think in contrary to the market. That’s contrarian approach. This makes them identify successful contra investments.

Sir Jhon Templeton on ‘Contrarian Investing’

Sir John Templeton, is rated highly as a contrarian investor and the story of his rise is an interesting one, but more about that later. What Sir Templeton had to say about ‘Contrarianism’ is very apt- ‘To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit’.

In a single sentence he explained about contrarian investing very clearly. This is the beasic principle behind the contrarian investment strategy. If you follow this one principle you can easily identify the profitable contra investments.

Essential Elements of Contrarian Investment Strategy

As per Howard there are two primary elements to contrarian investing:

I. Noticing some quality that others fail to see or appreciate and is thus not reflected in the market price. If something uncanny or out of the ordinary comes to notice- for example a technology which has great potential in future, but is still being developed, then it could prove to be a gold-mine if one has the foresight to invest in it.

II. Finding that the market vindicates the investor’s faith. At times we are apprehensive about our ability to assess a situation currently. We are pulled back by self-doubt yet bet on an investment and it turns out to be a winner. This is what it is about vindication of faith.

The above two elements are the guiding factors behind formulating a successful contrarian investment strategy.

Successful Traits for ‘Contrarian Investing’

Being a ‘contrarian’ investor requires a lot of courage. The characteristic traits of such contrarian investors require an insightful, skillful and incisive second level thinker’s ability. One who can think out of the box and keep away from consensus portfolios. Conventional wisdom has to be kept aside, Buffet is very specific on this “long on conventional short on wisdom”.

The contrarian has the ability and confidence to tell the world that the market is wrong in its assessments, as it is at times; the ability is derived from the contrarian-investor nature and the confidence stems from the fact that they possess a strong sense of “intrinsic value” and “a margin of safety”.

To be successful with contrarian investing these traits are very important. Develop these traits in you and acquaint with investors who have these traits in them. If you could work on this one thing seriously, you will become very successful at contrarian investing sooner or later.

Unconventional aggression – Key to “contrarian investing”

Some traits in ‘contrarians’ make them stand apart in the world of investments. Some investors believe in the dictum of ‘discretion is the better part of valor’, they would rather wait for the dust to settle down rather than catch a falling knife. However, contrarians are opposers by nature and would hence try and catch the falling knife rather than weigh their chances when the dust settles down because it is quite likely that there will be no bargain when everything gets back into the groove.

Contrarians are iconoclastic and they break-away from the conventional method of making an investment. This can often be a lonely path to traverse, but then again ‘fortune favors the brave’ and contrarians are brave hearts who do not shy away from making unusual investment decisions.

A Success Story of Contrarian Investing

Coming back to the success story of Sir John Templeton, in 1939, as a young farm boy, John went into his boss’s office and begged for a $10,000 loan. His boss granted him the loan and John did not waste time. He went out and invested it in small-cap stocks trading on a major exchange for $1 or less. The stocks numbered 100 in all, and all of them were in the ‘most hated stocks’ category. Subsequently these 100 stocks bailed the U.S. out of the Great Depression and catapulted Templeton into the –Investing Hall of Fame.

Today Templeton is worth more than $2 billion and the fund bearing his name is making money for a lot of investors.

Templeton’s contrarian views thus stood him in good stead and proved emphatically that ‘going against the tide’ has its virtues. His contrarian approach and contrarian investment strategy brough him the success.

Contrarians and their contributions in “Contrarian Investing”

Not all investors can be contrarians. For an average investor to become a contrarian would logically entail a lot of study and an uncanny knack for picking up bargains. Jim Rogers, Marc Faber, John Templeton, Sam Zell, Eduardo Elssztain and Gorge Soros are famous contrarians who have made it big in the world of investment. Among the tips they have shared are:

1. Identify an area which has a good prospect but is outside the normal conventional options. E.g. Going into agriculture as Jim Rogers did because farming is an area which is going to receive a lot of attention with time as lesser people are going to be involved in the production of more food for feeding the earth.

2. Try to follow the course which is opposite to custom and more often than not you will come up trumps.

3. Go in for an investment asset class when the prices are down,

4. Acquire a strong sense of ‘intrinsic value’ and ‘margin of safety’ as they are useful tools to assess a decision.

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  1. Rathore says

    March 2, 2014 at 10:22 am

    I was able to find good advice from your content.

    Reply

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I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
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Lionel Faber
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I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
Sridhar
Sridhar
8. September, 2021.
Financial planning brings peace in life. Holistic Investment have supported in arriving financial plan based on future goals. My investments are regular since then. They are professionals in their business, will recommend others.
Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
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This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
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Shivaram Andiappan Selvaraj
3. July, 2021.
I got a free first time consultation. I got my doubts resolved. They also gave additional advises for investment planning which was also useful.
Nellai B
Nellai B
26. June, 2021.
I have been associated with them for the past three years. They are very professional and polite in answering all our questions. I have complete trust in their suggestions. I strongly recommend for anyone. I am looking forward to have strong and successful association with them.
Google rating score: 4.4 of 5,
based on 61 reviews

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Jey S
Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
Lionel Faber
Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
Sridhar
Sridhar
8. September, 2021.
Financial planning brings peace in life. Holistic Investment have supported in arriving financial plan based on future goals. My investments are regular since then. They are professionals in their business, will recommend others.
Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
I got a free first time consultation. I got my doubts resolved. They also gave additional advises for investment planning which was also useful.
Nellai B
Nellai B
26. June, 2021.
I have been associated with them for the past three years. They are very professional and polite in answering all our questions. I have complete trust in their suggestions. I strongly recommend for anyone. I am looking forward to have strong and successful association with them.
Google rating score: 4.4 of 5,
based on 61 reviews

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