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Dreman Screen

Performance

  Dreman S&P 500
YTD Return: 2.8% 1.3%
Five Year Return: 18.3% 18.6%
Ten Year Return: 7.8% 5.2%
Inception: 11.1% 4.1%
Data as of 3/31/2014
The Dreman Screen represents AAII's interpretation of the investment approach and is not determined by the original strategist. The list of passing companies represents a hypothetical portfolio, which is used to track the screen’s performance on a chart.

Passing Companies

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Screening Criteria

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Chart

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The Philosophy

David Dreman has long studied the psychological underpinnings of the overall stock market and its impact upon valuation levels. Unlike the rational market assumed by traditional academic studies, Dreman sees stocks and markets driven by emotions that often push prices from their intrinsic value. Dreman feels the best approach to beating the market is to follow the principles of contrarian investing.

Contrarian investing is a disciplined investment approach using value measures that helps to avoid the emotional traps of the market. The contrarian strategy seeks to profit from other investors' misjudgments by seeking stocks that are out-of-favor with the market and avoiding the high-flying fashionable stocks that have been swept up by market euphoria. Eventually the market rediscovers out-of-favor stocks and lets the high-fliers fall back to earth.

David Dreman is one of those most associated with contrarian investing through his books and long-running Forbes column. He began writing about stock market psychology in the early 1970s through his first book, "Psychology and the Stock Market." Dreman followed up this work in 1979 with "Contrarian Investment Strategy-The Psychology of Stock Market Success" (revised in 1982 under the title "The New Contrarian Investment Strategy"), which examined the range of possible contrarian investment strategies in greater detail. These books served as the primary source for this article.

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