Value investing and contrarian investing are intrinsically related. Value investing seeks to identify good quality companies that are trading cheaply. To achieve that goal, contrarian investors tend to look in places that others have not. In doing so, they hope to uncover opportunities that are cheap relative to their intrinsic worth.
Both sets of investors must first establish what they believe a business is worth before betting against the market. There are few things as rewarding for either a value investor or a contrarian investor (many of which are one and the same person) than identifying a dislocation and mispricing in the market, supported by a consensus view, and investing with success despite the wider community’s concerns. It is worth noting that there is a subset of contrarian investors who do not undertake fundamental analysis of a business before they buy. This investor is keen to speculate (often successfully) that […]
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