Monthly Archives: December 2012

The Forecasting Pitfall of Fundamental Analysis

The Association methodology is ‘contrarian’ because it is quite different than most applications of fundamental analysis. The fundamental analysis technique is generally used by banks, pension funds and the majority of security analysts.  There are different styles of fundamental investing which range from momentum and growth investing to value and contrarian investing. In general, a fundamentalist believes that a company’s true value can be determined by analyzing financial indicators such as sales, inventory etc.  A fundamentalist believes that a stock price can diverge from the company’s true value and he is convinced that the market must recognize this discrepancy over time. Momentum and growth …Read more »

Taking advantage of Irrational Behavior Strategy

Contrarian Investing Strategy Three

This strategy is a variation of strategy #1. It looks at relative industry strength and investor sentiment. Indicators Down by 50% off 52 week low Bottom of cycle “Maximum market pessimism” Low relative Price/Earning Low relative Price/Sales Low relative Price/Book Low relative debt-to-equity Interest coverage ratio Cash flow A Contrarian stock  Down by 50% off 52 week high. We talked earlier about how the media over focuses daily on individual companies and sectors. One thing that can be done is to listen to the popular press with an ear tuned for these extremes. Phrases such as “disaster”, “doomed” and “dead” …Read more »

Warren Buffett Investment Philosophy

Warren Buffett

Warren Buffett’s philosophy can be summarized into key principles: If you had invested $100 in Berkshire Hathaway when he took over in 1965, you would have about $220,000 today.   He views investing as buying a piece of a business, rather than “renting” shares of a company for the short term. Buffett looks at business fundamentals and prefers a business that is: 1. simple and understandable. His purchases are not determined by gloomy economic forecasts, or pessimistic stock market forecasts.  He tends to put fairly large sums of money into things that he knows and management that he trusts.  He doesn’t invest …Read more »

Contrarian Investing is a Rational Approach to Investing

Contrarian Strategies

Contrarian Investing uses an investing methodology that is based on the principle of ‘rationality’.  To be a rational investor, there is a need to be realistic about both the upside and downside to any investment.  An investor must first recognize the tendency to be both over-optimistic and over-confident in his or her investment decisions. An investor must also recognize the tendency to over-rely on so called ‘experts’ for investment decision making. The Contrarian methodology is rational because it attempts to determine if an individual company, industry or even an entire market is over-priced (irrational exuberance) or under-priced.  A contrarian remembers that there were large periods of time …Read more »

George Muzea Investment Philosophy

George Muzea

Filled with in-depth insight and expert advice, The Vital Few vs. The Trivial Many will open your eyes to a new way of looking at the investment world, especially the stock market. You’ll discover how to look past media hype to discern what the Vital Few or corporate insiders—those who know their companies best—are doing. By explaining which information is accurate and valuable, as opposed to that which is misleading and financially hazardous, investment professional George Muzea will show you how to successfully and intelligently evaluate the stock market and find valuable gems that have yet to be discovered by …Read more »

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