On the Internet: Web Sites for Contrarian Investors
by CI Staff
A contrarian investor makes investment decisions contrary to prevailing beliefs—for example, buying when others are pessimistic and selling when they are optimistic, or buying out-of-favor stocks. A contrarian investor believes that the people who say the market is going up do so only when they are fully invested and have no further purchasing power, at which point the market is likely at a peak. On the other hand, when people predict a downturn they have already sold out, at which point the market is more likely to go up. Contrarian investing also emphasizes out-of-favor securities with low price-earnings (P/E) ratios. Some of the most famous contrarian investors include Benjamin Graham, Warren Buffett and David Dreman. These sites offer advice and educational information about contrarian investing with either all or a portion of their information free to registered users.
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Contrarian Investing Association
The Contrarian Investing Associations stated purpose is to bring independent-minded individuals together, share ideas, to have fun and to make money while going against the crowd. The Web site is an independent network of contrarian investors who all participate in the upkeep and freshness of the site. Members are encouraged to post commentary and articles they find interesting as well as discuss their current stock holdings and those they are considering for future purchase. Basic membership is free with registration.
Two introductory articles—Contrarian Investing Is a Rational Approach to Investing and The Forecasting Pitfall of Fundamental Analysis—are given as background on the contrarian beliefs and ideas. The site outlines four contrarian strategies that members are encouraged to read, understand and possibly follow. Each strategy is explained in detail and historical data is shown. The first strategy revolves around low P/E, price to cash flow (P/CF), price-to-book value (P/BV) and price-to-dividend (P/D) ratios, while the second strategy varies only slightly looking at the relative P/E, P/CF, P/BV, and P/D. Strategy number three focuses on relative industry strength and investor sentiment and behavior. Ben Grahams idea of a defensive investor is the key concept of the final strategy. Graham believed that defensive investors seek safety and freedom from frequent decision making while questioning whether a stock is a good value by fully understanding the difference between its market price and its underlying value. Finally, the strategy section ends with market entry and exit tips.
The site also allows members to post their own stock tips and ideas as well as read others suggestions. Members can discuss these ideas with each other via a message board. Lists of articles posted by other members can be accessed as well as a monthly update with commentary, market news and an article of the month.
Elite Contrarian Members receive added reports to help with research including Irrational Exuberance updates, stock filters, The Contrarian Report and a watch list. Elite membership costs $39 per year.
Money magazine has called Bearmarketcentral.com one of its favorite cranky contrarian Web sites. The site is devoted to bear-market-minded investors and supports a contrarian investing style. Periodically, an updated commentary is posted on the home page that discusses the current market in relation to the bear market philosophy. Archived commentaries are available as well.
The sites Hair of the Bear forum allows registered users to post questions and comments and have discussions about topics such as the market, bear funds, short selling and the economy. Registration is free. The Daily Reckoning is a free E-mail sent to registered members that discusses expectations of the current market and how to profit from current conditions. Each letter contains commentary written by one of the authors of the book Financial Reckoning Day, William Bonner and Addison Wiggin. Two sample E-mails are available on the site. The sites Bear Cub section offers a free financial education center presented by Online Trading Academy that is geared toward individual investors of all skill and knowledge levels. Links to useful Web sites and answers to commonly asked bearish investing questions are given as well. The site also offers links to bearish and contrarian investing articles and commentary, free quotes and charts, and related books. The Fotley Mule offers daily jokes and cartoons poking fun at contrarian and bearish investors.
Contra the Heard
Contra the Heard calls itself an information service for independent individual investors. The sites creators are Benj Gallander and Ben Stadelmann, who write columns for various publications and appear as financial guests on various TV shows including CNN and CBS This Morning; each has over 25 years of experience in the investing world. Gallander is the author of two books, including The Contrarian Investors 13: How to Earn Superior Returns in the Stock Market.
The site gives their stock-picking philosophy, which includes statements like, concentrate on turnaround situations and stocks that are currently unpopular but are likely to regain their luster in the near future and analyze managements ability to achieve stated goals. Subscribers have access to buy and sell information while non-subscribers can learn only about the sells. When a stock is bought or sold, subscribers receive an E-mail or a fax with the necessary information. Contra the Heard is a 16-to-20-page newsletter that includes a commentary on the market and analyzes portfolio performance; it is published quarterly.
Commentaries from January 2000 and year-in-review articles since 1997 are available for free on the site. An investing glossary and a list of related links are also given. Subscriptions cost $450 per year; circulation is limited to 1,000 subscribers at a time.
Similar to Bearmarketcentral.com, the PrudentBear advocates a contrarian style of investing. The site offers up-to-date market commentary and news as well as articles, presentations and arguments for a current bear market. Commentaries are updated almost daily; topics include International Perspective, Random Walk, and Credit Bubble Bulletin. Every other day, a guest commentator writes their opinion on the current market and how bearish investors can make profitable decisions. There is also a link to current statistics on the S&P 500, the Russell 2000 index and Amex sector indexes including pharmaceuticals, gold, and oil.
Current news is broken into sections that include market movers, economy and the Federal Reserve, market and finance, company and industry, and international. Each section includes recent articles from USA Today, TheStreet.com, Reuters, Wall Street Journal, New York Times, Bloomberg and more. An archive for each section houses articles from the past three months.
The Bear Case section offers a slideshow presentation called A Bear Tour, which explains why investors should take a long-term bearish stance in the market. Other presentations include: Is the Dollar at Risk? and Why the Bear Market Is Not Over.
The site also has a mutual fund section that shows performance data and other information on mutual funds in the Prudent Bear family, which include the Prudent Bear fund and the Prudent Global Income fund. Access to the site is free.