Diverging Views on Contrarian Plays
Contrary to popular opinion, it's getting harder to find a contrarian opinion on Wall Street.
Not too long ago, the stock market overflowed with companies suffering from the aftereffects of bubbles or self-inflicted scandals. Meltdowns at high-profile outfits such as Time Warner (TWX) and accounting misdeeds at big companies like Tyco (TYC) were delivered on a regular basis to an investing public eager to kick the downtrodden while their stocks went down.
Meanwhile, the fallout from the good folks at Enron leveled the energy and utility sectors, collapsing the once-quiet realm of coupon-clipping widows, orphans and value investors.
The result of all this carnage was a contrarian investor's dream. The Street became so strewn with the carcasses of once-proud companies that contrarian fund managers were practically tripping over them. The key to their success, of course, was finding the proverbial babies thrown out with the bathwater."Sometimes when a stock is hated so intensely there is a legitimate reason for it to get pummeled, but often times people are just pricing risk incorrectly," says David Decker, portfolio manager of the $2.7 billion (JSVAX)Janus Contrarian fund. Decker's prowess in pricing risk during those salad days paid off. In 2003 and 2004, his fund gained 53% and 23%, respectively, nearly double the returns of the S&P 500. And year to date, Decker's performance has been far from shabby. He's up 6.7%, or more than seven percentage points ahead of the index, so far this year. Nevertheless, Decker says great contrarian ideas are getting tougher to find as the market -- according to his trusty discounted cash flow model -- has grown more expensive. As a result, he has been forced to look abroad for equities with the perfect contrarian mix of low cost and investor disenchantment. The Janus Contrarian fund now holds 40% of its assets in foreign stocks, according to Decker, with the largest weighting in Indian infrastructure companies.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV