Contrarian (redirected from contrarianism)

Contrarian

An investment style that leads one to buy assets that have performed poorly and sell assets that have performed well. There are two possible reasons this strategy might work. The first is a mean-reversion argument; that is, if the asset has deviated from its usual level, it should eventually return to that usual level. The second reason has to do with overreaction. Investors might have overreacted to bad news sending the asset price lower than it should be.

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contrarian

An investor who decides which securities to buy and sell by going against the crowd. For example, a contrarian would tend to purchase the stock of steel companies when steel stock prices are depressed and most investment counselors are advising against them. Contrarians operate on the premise that when stocks are very popular they are overbought and when they are very unpopular they are oversold.

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Contrarian

An investor who buys securities that others are selling and sells those that others are buying. A contrarian operates on the premise that most other investors are wrong most of the time since they tend to overreact to both good news and bad news. As a result, a contrarian assumes that either prices will revert to the mean and he/she will make a small profit, or that investors are entirely wrong and the market is moving in another direction, in which case the contrarian will realize a larger profit. See also: Crowd.

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Contrarian. An investor who marches to a different drummer is sometimes described as a contrarian. In other words, if most investors are buying large-cap growth stocks, a contrarian is concentrating on building a portfolio of small-cap value stocks.

This approach is based, in part, on the idea that if everybody expects something to happen, it probably won't.

In addition, the contrarian believes that if other investors are fully committed to a certain type of investment, they're not likely to have cash available if a better one comes along. But the contrarian would.

Contrarian mutual funds use this approach as their investment strategy, concentrating on building a portfolio of out-of-favor, and therefore often undervalued, investments.