In tricky times, sometimes it pays to swim against the tide
Contrary investors can reap rewards, if they are careful, reports Julian Knight
Sunday 09 May 2010
Chaos in Greece, the Dow Jones index nose-diving on fears over European government debt, a hung parliament in the UK – there are few positive reasons to invest in stock markets at present.
However, there are brave souls out there that pride themselves on swimming against the tide, the so-called contrary investors. So, in these difficult and choppy times, can you learn anything from their approach?
"It's better to buy when people are fearful and sell when they are optimistic, but many investors can't help going with the herd," says Ben Whitmore, manager of the Jupiter Special Situations and well-known contrarian. "Take the market at the moment. Lots of managers and investors are buying into the China success story, but I think a lot of the upside has happened so I have positioned myself elsewhere, such as the pharmaceutical sector, which has some good companies, currently valued at 40-year lows."
Barry Norris, manager at Ignis Argonaut European Alpha Fund, sees his own area of expertise as the arch contrary play at present, even with the civil unrest in Greece and ructions over the future of the euro as well as the debt of the Pigs – Portugal, Ireland, Greece and Spain. "Europe has been the forgotten market for many investors but the German economy is booming and there is a strong recovery under way elsewhere in Europe. There are difficulties, sure, but the real economy is doing well again and there are opportunities," Mr Norris says.
Another contrary play favoured by Mr Whitmore is housing in the US, originator of the sub-prime boom-bust. "A lot of the firms which have survived look very good value and the bad news has happened," he says. "Contrary investors tend to sell a little early on the upside, but make up for this by buying back into markets in a piecemeal way."
This, though, seems to require timing the market, which is usually a no-no for private investors, who don't have access to the same resources as City insiders. "You can lose your shirt," says Rob Morgan, analyst from independent financial advisers Hargreaves Lansdown. But by "focusing on stock markets and sectors which have taken a battering, and drip-feeding money in, you can take advantage of any recovery".
The cheapest, most easily accessible way of drip-feeding money into a market is via a unit or investment trust saving scheme. These allow investors to pay in as little as £25 a month into a fund which invests in a basket of shares.
"Look for fund managers who are contrarian and take strategic positions rather than just shadow an index," Mr Morgan says. "Another option, if you want to put in a lump sum, is to go for an exchange-traded fund. These give you exposure to any number of countries or investment sectors."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
How couples can protect their financial interests when cohabiting
Money alert: Overdrafts at HSBC and First Direct
'Dismal' eurozone data sparks concerns
How to protect your assets if the stock markets begin to head south again
Child Maintenance Service to replace Child Support Agency - but is it better?
- 1 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 2 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 3 Kajieme Powell: Missouri police release video footage of second man killed by officers
- 4 Paul Scholes: Manchester United need five experienced players who can turn round a desperate situation
- 5 James Foley 'beheading': Met police warn public watching murder video could be criminal offence
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Crisis? What crisis? A visiting US doctor gives the NHS a rave review
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Scottish Independence Referendum: Salmond described as 'arrogant, ambitious and dishonest' by Scottish women
iJobs Money & Business
Highly Competitive Salary: Austen Lloyd: CITY - HIGHEST QUALITY INTERNATIONAL ...
£500 - £600 per day: Orgtel: Relationship Manager, London, Banking, Accountant...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
£40000 - £55000 per annum: Harrington Starr: A Global Financial Service Organi...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony