{"id":30548,"date":"2012-06-29T13:38:01","date_gmt":"2012-06-29T17:38:01","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/06\/jim-cramer-says-contrarian-investing-forget-about-it\/"},"modified":"2012-06-29T13:38:01","modified_gmt":"2012-06-29T17:38:01","slug":"jim-cramer-says-contrarian-investing-forget-about-it","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/06\/29\/jim-cramer-says-contrarian-investing-forget-about-it\/","title":{"rendered":"Jim Cramer says, \u201cContrarian Investing? Forget About It\u201d"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

\"Jim<\/p>\n

Contrary to Cramer's belief, contrarian investing works. Just ask the likes of Warren Buffet, George Soros, John Templeton, David Dreman, and Jim Rogers.<\/p>\n<\/div>\n

A couple of weeks ago Mad Money<\/em> host Jim Cramer made the above declaration regarding contrarian investing. He went on to say, \u201cI think it\u2019s wrong. I think it doesn\u2019t matter\u2026 I think it\u2019s really a treacherous way to invest.\u201d<\/p>\n

I was a little baffled when I saw excerpt. Then I saw the editorial written by Producer Drew Sandholm where he gave the following definition of a \u201ccontrarian investor:\u201d<\/p>\n

\u201cIn the investment world, a contrarian is someone who takes a position that differs from the majority. If a particular sector is \u2018hated\u2019 by most investors, a contrarian might want to buy in. After all, if few investors like the sector, a contrarian thinks there are few people left to sell, making it immune to big declines.\u201d<\/em><\/p>\n

Sandholm went on to write that Cramer feels the strategy to be \u201ctoo hazardous\u201d to recommend. It infers that contrarian investing is based purely on sentiment and that investors should be using fundamentals and research to decide which companies to invest in.<\/p>\n

However, here at Investment U<\/em>, we don\u2019t feel these two things are mutually exclusive. You can still look for solid fundamentals in regions and sectors that were abandoned by \u201cthe herd.\u201d<\/p>\n

For instance, Alexander Green recently wrote about finding fundamentally sound companies in the beaten-down natural gas sector<\/a>.<\/p>\n

Contrarian Investing is<\/em> Based on Fundamentals<\/strong><\/h2>\n

Contrarians aren\u2019t rebellious teens, rejecting their parents\u2019 way of investing. What the piece misses is that contrarian investing is<\/em> based on fundamentals. Many times popular investment sentiment is not<\/span>. Do we need to remind you of the dot com and housing bubbles?<\/p>\n

Investment U<\/em> defines a contrarian investor <\/em>as someone who believes in independent wealth building and profits rather than the actions of the herd. The key isn\u2019t to go against the grain for the sake of being different, but to find opportunities based on solid fundamentals that are ignored or shunned by everyone else. And if this is done successfully, then you get in on the ground floor and watch profits rise as the rest of the investment world gets a clue.<\/p>\n

In Cramer\u2019s defense, I believe he\u2019s specifically speaking about those investors who are looking at whether a sector is under or overweighted compared to the S&P 500 in an attempt to time the market. But that definition doesn\u2019t cover the whole contrarian movement.<\/p>\n

The Vast Spectrum of Contrarian Investing<\/strong><\/h2>\n

I don\u2019t think anyone out there would call Jim Rogers, George Soros, or Warren Buffett contrarian day traders. However, the contrarian part of that statement is true.<\/p>\n