Anyone have any ideas for contrarian bets of their own? At the risk of looking like an idiot (have never worried about that). I’m looking closely at Nokia. I’m skeptical of Apple’s traction worldwide as I doubt the majority of the world will be able and willing to pay a substantial premium for the iPhone which tends to leave Android as Nokia’s real competitor in the smartphone market in low-midrange devices. I really like Windows Phone, and I don’t see it totally unrealistic that Nokia can strike back with a few good products.
I’ve only started thinking about this over the last few days, so nothing concrete yet. But definitely interested in hearing any contrarian ideas that others may have.
i figure if you can figure out the replacement value for these guys, than its good…it is quantitatively very cheap and their patents are problably worth their market caps alone, but i can’t figure that out so i sit out until someone convinces me of doing something…
Not really, with Rimm, their platform is dying, with nokia, they’re (slowly) movign to a new platform - wp8. I suppose it’s levered to success of winp8…not saying it’s an actionable idea…but could develop into one down the line.
“Contrarian” is sort of a weird way to look at a stock. Since market consensus determines stock prices, if we define “contrarian” as “not equal to consensus”, any price prediction that is not the current market price is contrarian. That is, a long or short position in Nokia are both contrarian. By extension, any position where you want to make money (other than through beta) is a contrarian bet.
Anyway, Nokia is not the same as RIM, in my opinion. RIM can only succeed if both its hardware and software succeed. Nokia is mostly a hardware company. Their hardware is not bad either. It’s just a matter of matching it with the appropriate operating systems. Sure, their product is not unique (like Apple), thus margins will be thinner. However, they don’t have all their eggs in the same bucket like RIM, making Nokia much less risky.
This is how I think of it as well. Likewise, every investor is a value investor because the definition of investing is to deploy some amount capital with the expectation of getting more capital back at some future date, thereby generating value. No one sets out to get less capital back (an anti-value investor).
Symantecs aside, if you look around the industry for a while, it becomes clear that most people are doing pretty much the same thing and are neither contrarian nor value investors. Even people who are “value investors” tend to be very attracted to stocks that have already gone up (“Look, it’s working!”). Doesn’t mean you have to catch the bottom, but people are psychologically very attracted to stocks at their 52-week highs, even many “value” investors. I posted a stock pick on a major financial site that is invite only for professional investors – the chart looked horrendously bad with 3 successive gap downs. My pick was well thought out and researched but received a low rating from the investor community. That stocked doubled in less than 12 months for the reason I said and is probably on its way to doubling again. Take comfort in your meaningless charts, bitchez.
The sad truth, despite what CFA, MBA, books, Buffett, and everyone / everything else says, is that the only way to generate “value” is to buy something that someone else is going to be willing to pay more for at some future date. That’s it. I prefer the term “catalyst investing.” Trust me, plenty of small cap stocks stay cheap for loooooong periods of time in the abscence of a catalyst. Tell me what other people believe, why they are wrong, and what that means for the stock – that’s the way to invest.
If I told you it would out me because my write up is the only one on this ticker for the last several years (if ever) on both VIC and Sum Zero. That said, I am working on a few others now that I think have good potential and may post on those when I finish the analyses, however, many of the recs are sub-500mm of cap and may not be interesting to you.
bromion, i think we are pretty much on point with our investing views. i’m just more trading oriented + shorter time frame as i have a preference for higher volume / larger cap names. always a pleasure to read your posts.
That’s a good point, numi. I do not really see myself ever becoming a trader, but I am starting to try to work more momentum into my “value investing” approach. There are few things quite as frustrating as having a well reasoned view point on something but having zero market reaction (or even a negative reaction) – the only logical conclusion is that either you are wrong or that everyone else is wrong, neither of which is very comforting. If I am going to buy something, I want it to go up pretty quickly and not take 3 years to play out. In theory a 3 year call is among the most attractive you can make as an investor because few investors look out that far and prices for many securities are much less efficient on a 3+ year basis, but in reality, 3 years is an effing long time to wait for something to work out (it sounds great in theory but try waiting that long for something to pan out) and as we have all seen, lots of unexpected things can happen over a three year time horizon.
For example, back in late 2007 I met with the CEO of Isilon Systems (formerly ISLN) and was pretty impressed with the company and its candidacy as a buyout (pretty clear case to be made at that time). The stock was way down from its recent IPO after a couple of missteps. I watched it for a while and bought some around $6 if I recall correctly. I was brand new to investing and did not have a real exit strategy per se but $6 seemed pretty cheap. Lehman then proceeded to hit not too long after that and the stock got down to $2!!! I cried a little inside but did not sell it (nor did I have the balls to buy more at $2). Isilon did get bought out, and the stock went out around $30 in mid-2010. I made a lot of money on that investment but it took FOREVER to play out and was pretty uncomfortable in the mean time.
I have seen many examples like that since then. The market is a discounting mechanism for the next 6 - 12 months and is not that efficient beyond that time frame (at least in small caps). But you better be pretty skilled at timing your entry or you can go broke being correct. I’m trying to focus on finding “value stocks” that are about to become “growth stocks” and develop momentum characteristics in the not-too-distant future. I feel like value investing is pretty dangerous unless you are pro and that anyone operating out of their arm chair at home should stick to a trend following strategy and maybe overlay some basic fundamentals onto a momentum strategy so you don’t get killed owning garbage – go with the hot 50 from IBD and avoid anything that looks overly suspect with a crazy business model, that sort of approach.
Basically, I think it’s definitely possible to be “too reasonable” for the stock market. You should be unreasonable because other people are going to be unreasonable. While I don’t advocate being an emotional investor, you certainly have be aware of how crazy and emotional other people might be. So the test is always, “Would an unreasonable person get excited about this?” If the answer is yes, you might have a good investment on your hands.
ohai - agree with your view and at some point a transaction has to take place. Imo, contrarian/consensus can be distilled to providing or taking liquidity.