A lot of people claim to be contrarian, but few actually are. Either, they think they’re unique in having an idea, even though everyone shares it. Or they claim it but never act.
Take Valeant Pharmaceuticals. First, imagine a stock rising to lofty heights – about $262 – from a 2009 low around $11. Had you bought it at any point before June 2015, you would have made money.
Then August came with bad news and the hits just kept on coming. The stock collapsed 87% from its highs to $35.
I doubt many people will look at that chart and think opportunity. It’s a picture of a loathed and ostracized stock. Each dip was another round of terrible news.
Valeant has been the poster child of every mistake possible – catching a falling knife, over-concentration, holding on too long, the errors of leverage, accounting fraud – but a stock’s story doesn’t end until it hits zero. There are several potential outcomes – most don’t end well for shareholders. Maybe there’s redemption. Maybe it’s zero. Who know. I sure don’t.
But saying you’re a contrarian means looking at and jumping headfirst (ok, maybe just dipping a toe – ankle deep at most – in Valeant’s case) into that muck because that is the pool that real contrarians play in. I doubt many people can do that. It certainly doesn’t look easy or comfortable.
Reminder: The Berkshire annual meeting is tomorrow. For the first time ever you can sit on your couch and tune in. Yahoo Finance is hosting live coverage of the event starting at 10:00am ET. An on-demand replay will be available for 30 days. And I’ll post notes sometime in the next week or two.
Last Call
- More On The Bad News Delay – L. Swedroe
- 50% Returns For Commodities And Emerging Markets? – M. Faber
- 180 Years of Market Drawdowns – A Wealth of Common Sense
- What You Should Remember About the Markets – Dual Momentum
- Echoes of 1999: The Tech Bubble and the “Asian Flu” – Research Affiliates
- The Path of Least Resistance – M. Housel
- The Best Microcap Investor You’ve Never Heard Of – MicroCapClub
- The World Needs More U.S. Government Debt – N. Kocherlakota
- Why It’s Hard to Recognize the Unlikely – Nautilus
- Don’t Get “Should” Mixed Up with “Is” – Farnam Street
- How Information Graphics Reveal Your Brain’s Blind Spots – ProPublica