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David Dreman Investment Philosophy

David Dreman

David Dreman summarized his investment philosophy as the following: Psychological biases tend to interfere with sound investment decisions, but investors who understand these biases can prevent them from affecting their own judgment and can profit from the biases in others. To prevent the biases from affecting your own decisions: Don’t be influenced by a hot performance record. Don’t rely solely on the specific situation, but take into account prior probabilities of similar situations. Don’t be seduced by recent rates of investment return for individual stocks when they deviate sharply from past norms; use long-term stock characteristics. Don’t expect the strategy …Read more »

Relative P/E, P/CF, P/D and P/BV Strategy

Contrarian Investing Strategy Two

This strategy looks at relative industry strength.  The lowest P/E companies within an industry regardless of how high or low the general price of the industry group. The advantage of this strategy is that buying the lowest values stocks in each major industry opens a much larger investment universe than just using strategy #1. The relative industry method can be used with the entire market.  The relative contrarian strategy has more diversification by industry than strategy #1.  Looks for companies that have greater than 20% discount to its peers. Also used are the Low P/CF (Price relative to Cash Flow), P/BV ( Price …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 »

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 »

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 »

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