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The Power of Contrarian Investing: Beating the Stock Market by Going Against the Crowd

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Contrarian investing can lead to success in the stock market.

description: an anonymous investor sitting at a desk with a laptop and charts on the wall behind them. they appear to be deep in thought, analyzing investment opportunities.

Contrarian investing is a strategy that goes against the mainstream opinion of investors. Instead of following the crowd, contrarian investors believe that the market may be overreacting to certain news or events, creating opportunities for them to buy undervalued stocks. While it may seem risky to go against the crowd, many successful investors have used this strategy to their advantage.

One example of a contrarian investment opportunity is Dupont De Nemours Inc (NYSE:DD). In 2020, the company was facing a challenging year due to the pandemic. However, contrarian investors saw an opportunity to buy the stock at a low price. As the economy began to recover, the company's stock price began to rise, leading to significant gains for those who invested early.

Another example is GameStop Corp (NYSE:GME), which became a popular target for short-sellers in early 2021. However, a group of retail investors on Reddit banded together to buy the stock, causing the price to skyrocket. While this may have seemed like a risky move at the time, contrarian investors who bought in early saw significant gains.

Volkswagen AG 1/10 ADR (OTC:VWAGY) is another example of a contrarian investment opportunity. In 2015, the company was embroiled in a scandal involving emissions cheating. Many investors sold their shares, causing the stock price to plummet. However, contrarian investors saw an opportunity to buy the stock at a low price. As the company began to recover, the stock price began to rise, leading to significant gains for those who invested early.

Brandywine Asset Management CEO Mike Dever warns about the perils of "Jackass Investing," which is when investors follow the herd and make decisions based on emotions rather than facts. He advises investors to do their own research and make decisions based on data and analysis.

Many investors think office real estate is dead, but this company's numbers suggest otherwise. Contrarian investors who believe in the future of office real estate may find opportunities in this company's stock.

Charles Schwab (NYSE:SCHW) is another stock that can be considered a contrarian investment opportunity. While many investors are focused on high-growth tech stocks, Schwab offers a stable investment option with a strong track record. Contrarian investors who are looking for a reliable and consistent investment opportunity may find Schwab's stock appealing.

Richard Bernstein Advisors points out that if the dollar depreciates in 2023, investments in other countries could be more appealing for contrarian investors.

Contrarian investing requires extra due diligence to identify traits that give investors confidence and conviction to invest in a company. This may include looking at a company's financials, management team, and competitive landscape.

"Depressed levels of retail investor sentiment are sending a strong buy signal for US equities again," said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets. Contrarian investors who believe in the long-term prospects of the US economy may find opportunities in undervalued stocks.

This writer sometimes uses a contrarian investing approach when buying shares. But he doesn't abandon his normal investment strategy to do so. Instead, he looks for opportunities where the market may be overreacting, and he uses data and analysis to make informed decisions.

contrarian investingstock marketdupont de nemours incgamestop corpvolkswagen ag 1/10 adrreal estatecharles schwabus equitiesdue diligenceanalysisNYSE:DDNYSE:GMEOTC:VWAGYNYSE:SCHW

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