A lot of successful investors are contrarian’s. Regardless of the conventional wisdom, these investors look past the current market place, and see the future past the headlines. A current example, currently the oil business is in a free fall, oversupply and political manipulation, are to blame. Here’s the thing, does anybody believe that the world and it’s oil dependent economies are going to suddenly wean themselves of oil? Of course not! I have heard multiple talking heads proclaim that free fall per barrel price of oil to be $30.00 by summer. Here’s the point, enjoy it while you can! Low oil prices help the family budget, and better yet, an opportunity to the investor. Oil prices have created a ‘chicken falling” mentality, causing program traders, and the undisciplined investor to sell and cut and run.
The Contrarian Investor, on the other hand is sweeping in and buying U.S. drilling companies, and Canadian drilling and support companies at a fraction of their value 6 months ago. This includes support businesses in crucial areas as well. While the banks and “smart” investors are running, the infrastructure providers, to the oil boom, hotels and housing in the Bakken region, of North Dakota, and the West Texas, Permian fields, have great opportunities for the contrarian investor. At a devalued price, the result in earnings and value, when the table turns, will be dramatic. At one time during the previous financial depression, I saw a chance to buy Goldman, Sachs at $83.38 dollars a share. What is that worth now? It was obvious to me that not all financial institutions are equal. Time has proved that evaluation. Interesting point, the best days of gain in the stock exchange was the day AFTER the crash, 1929, the Regan crash, the 2008 crash all had record recovery immediately, the day afterward.
So what does the contrarian do? The philosophy is to take with a “grain of salt” all advice, paid or (even free!) and trust the long-term realities you know and believe in, then be aware of trends which defy what you have seen and experienced. Those are buying opportunities! Be quick and be disciplined! If you like a stock or investment after research, you buy that security, the next day, it falls of the board, what do you do, consider buying more. Your first impression was it was a good investment, if it falls a bit, price wise, it might be a great investment. Trust yourself. Follow blogs, forums, even mainstream news programs can give you a good start, sometimes by reading between the lines, See the counterpoint and don’t necessarily follow the short-term wisdom.
As always there are risks in investing, and all investments are not created for all investors. I suggest that seeking out your own investment, important to become fluent within the investment, its goals, its operation, its management. This will make you in charge, conversational on the topic, and comfortable. Make’s you an expert. You don’t have to know all about all investments, just your investments.