Displaying items by tag: contrarian

(New York)

One interesting investing strategy (admittedly always for a small minority of a portfolio) is to look at the very worst stocks in the market for a contrarian bet. Of all the thousands of publicly traded and analyst-covered stocks, just 90 have no “Buy” ratings from a single analyst. Out of that down and out basket, there are three interesting stocks to consider; shares which could do well if the economic recovery even goes just a little bit right. The stocks are: Sally Beauty Holdings (beauty supplies to consumers and salons), Michaels (the arts and crafts store), and Blackbaud (a software provider to the non-profit space).

FINSUM: Of these, Michaels is moderately interesting because they just brought in a new senior executive from Walmart, which should help improve margins and store performance, which could lead to good multiple expansion.

(San Francisco)

A year ago you were a considered a maniac if you didn’t have your portfolio loaded with FAANGs and other tech stocks. What a difference a year makes! Tech stocks are now largely out of favor after a rough year that has underperformed the S&P. There are a lot of fears of regulatory scrutiny and slowing financial performance. The tide has turned so much against the stocks that it is fair to call them a contrarian bet.

FINSUM: It sounds quite ridiculous to call some of the world’s most popular stocks over the last few years “contrarian”, but it seems true at this point. It appears it might be a good time to buy, though regulatory fears may prove legitimate.

(New York)

There are a lot of reasons to be bearish on stocks right now. Aside from worries about rates and a recession, there is the big issue of a potential trade war to consider. However, there is at least one reason to be optimistic—the overall pessimism of investors. In one of the classic contra indicators, contrarians often see market pessimism as a strong buy signal. Investor sentiment has abruptly swung from very bullish to strongly bearish, with negative sentiment its highest in seven months. A strategist at BNP Paribas commented that ““There’s more of an extreme fear reaction now … As a contrarian indicator, that makes me actually bullish”.

FINSUM: We don’t think this signal means anything other than investors are afraid of rates rising, a recession, and a trade war. Since all of those things could come true regardless of how investors feel about stocks, we don’t believe there is much significance to this.