Invest
Contrarian investors could win in current climate
Investors who have a firm focus on the fundamentals will benefit greatly from the mispricing opportunities currently opening up in the market, but it does require long-term perspective, an investment officer has advised.
Contrarian investors could win in current climate
Investors who have a firm focus on the fundamentals will benefit greatly from the mispricing opportunities currently opening up in the market, but it does require long-term perspective, an investment officer has advised.
Simon Mawhinney, the chief investment officer at Allan Gray, has highlighted how the gap between defensive stocks and cyclical stocks has never been wider.
Defensive stocks such as healthcare, REITs and utilities are currently sitting in stark contrast to the cyclical stocks of materials, energy and the banks.
Calling it “truly a contrarian investor’s market”, Mr Mawhinney said it’s “one which will reap dividends for investors with a firm focus on the fundamentals”.
He commented that the market “offers compelling investment opportunities for those with a longer-term perspective”, despite the presence of earnings headwinds due to the COVID-19 pandemic.
“Market uncertainty has an uncanny way of presenting the greatest opportunities for contrarian investors,” he indicated.
But Mr Mawhiney advised that to benefit from such mispricing opportunities does require “a long-term perspective, a contrarian approach and a recognition that the future is far less predictable and certain than consensus would have one believe”.
Recent issues — such as the Trump impeachment, the bushfires and COVID-19 — have all reinforced “not only the uncertainty of what lies ahead, but more importantly, how difficult it is to know what the next important catalyst may be”.
As a result, the chief investment officer said “it is even more important, when assessing the value of assets, that you buy them for much less than they are worth”.
“This approach is the contrarian investor’s best weapon,” he said.
Reiterating that there is lots of opportunity in the market, Mr Mawhinney said that indiscriminate selling had resulted in companies with strong balance sheets and excellent asset bases selling at “very attractive prices”.
“Subject to the severity of the impairment cycle, even the banks might offer exceptional long-term value,” he commented.
About the author
About the author
Shares
Aussie investors flock to social media to learn about trading
Aussie investors are increasingly turning to social media platforms for education on trading, as collaboration and reliance on a community become integral in the way traders learn. ...Read more
Shares
GameStop looks to cash in on surge by selling 3.5m shares
The GameStop saga continues as the retailer moves to capitalise on its newfound fame by offering up for sale 3.5 million of its shares. ...Read more
Shares
Expert warns against media-led stock frenzies as GameStop shares plummet to 7-week low
An expert has urged “extreme caution” when joining social media-led stock frenzies, after GameStop shares were rocked by its less than favourable financial results. ...Read more
Shares
GameStop fails to meet revenue estimates, shares seesaw
GameStop has failed to capitalise on the frenzy around the stock, missing its Q4 estimates, although it reported strong sales in early Q1. ...Read more
Shares
Why CBA’s BNPL launch won’t be the end of Afterpay
The big four bank’s arrival into the buy now, pay later sector is unlikely to have an impact on the established players, with the bank focusing on supply instead of consumer demand, an industry expe...Read more
Shares
How investors can practically incorporate more ESG into their portfolios
Six-year-olds and healthy food can be like mixing water with oil – they don’t really like to party together, and it can be a constant source of frustration. That said, the difference is that you h...Read more
Shares
How will PayPal’s arrival impact BNPL investors?
US payment giant PayPal has announced that it will bring its ‘Pay in 4’ option to the Australian market by June, but is unlikely to impact the BNPL players as much as investors would expect, an in...Read more
Shares
Elon Musk loses $35bn as shares tumble
Tesla CEO Elon Musk has seen a dramatic wealth reversal, with his personal fortunes falling by US$27 billion ($35 billion) as Wall Street continues its EV and technology-based stock sell-off. ...Read more
Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now
Raging floods, the tech stock bubble and the ongoing SG debate
Listen now
Meet the Manager with Trilogy’s Philip Ryan: RBA rates and property price growth
Listen now
The continued property boom, ethical investing and engaging with your super fund
Listen now
Shares
Aussie investors flock to social media to learn about trading
Aussie investors are increasingly turning to social media platforms for education on trading, as collaboration and reliance on a community become integral in the way traders learn. ...Read more
Shares
GameStop looks to cash in on surge by selling 3.5m shares
The GameStop saga continues as the retailer moves to capitalise on its newfound fame by offering up for sale 3.5 million of its shares. ...Read more
Shares
Expert warns against media-led stock frenzies as GameStop shares plummet to 7-week low
An expert has urged “extreme caution” when joining social media-led stock frenzies, after GameStop shares were rocked by its less than favourable financial results. ...Read more
Shares
GameStop fails to meet revenue estimates, shares seesaw
GameStop has failed to capitalise on the frenzy around the stock, missing its Q4 estimates, although it reported strong sales in early Q1. ...Read more
Shares
Why CBA’s BNPL launch won’t be the end of Afterpay
The big four bank’s arrival into the buy now, pay later sector is unlikely to have an impact on the established players, with the bank focusing on supply instead of consumer demand, an industry expe...Read more
Shares
How investors can practically incorporate more ESG into their portfolios
Six-year-olds and healthy food can be like mixing water with oil – they don’t really like to party together, and it can be a constant source of frustration. That said, the difference is that you h...Read more
Shares
How will PayPal’s arrival impact BNPL investors?
US payment giant PayPal has announced that it will bring its ‘Pay in 4’ option to the Australian market by June, but is unlikely to impact the BNPL players as much as investors would expect, an in...Read more
Shares
Elon Musk loses $35bn as shares tumble
Tesla CEO Elon Musk has seen a dramatic wealth reversal, with his personal fortunes falling by US$27 billion ($35 billion) as Wall Street continues its EV and technology-based stock sell-off. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
