Contrarian Model Portfolios

Contrarian Investing is an investment strategy that is characterized by purchasing and selling in contrast to the prevailing sentiment. A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets.

We are constantly on the search for company stock prices that react negatively, or have muted reactions, to good news. These type of over or under-reactions are often the result of market gyrations or the inability of investors to digest the full scope of a particular news event. At the start of 2016, we decided to create our ‘Buy on Pullback’ mock portfolios to take advantage of these mispricing scenarios.

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The stocks we consider for inclusion are generally stocks on which we’ve already generated content and whose businesses and financials we intimately understand.

The Buy on Pullback portfolio is our most structured and defined product, since we specify how many stocks (4 to 5) will make up the portfolio. History has already shown that owning all the selections (with equal weight) in each portfolio maximizes success. This assumes holding through times of volatility to the closing of each holding, which is typical with microcaps.

Our first 2 portfolios, now closed, reaped solid returns 35.6% and 36.4% while they were open. Several other portfolios have done as well or even trumped these results.