JoJosida It is not a paint by numbers book or something that will guarantee success, but good fundamental education and a way of looking at investing. This book is updated recently by the author, David Dreman, a pioneer on behavioral investing and a true contrarian. That alone earns kudos from me. Jul 08, Will rated it it was amazing.
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But every opinion is also rigorously backed by a wealth of objective data. The book offers a precise blueprint for investing successfully with a minimum of risk. Contrarian Investment Strategies: The Next Generation makes an important new contribution: a novel way to analyze risk.
David Dreman is both. In plain language, Dreman explains that the real risk is in investments that underperform for your needs and expectations. This is a great book for all investors, laymen and professionnal alike. Serious, independant investors will find it rewarding. Contains lots of material that will jolt top money managers and academics. His techniques have spawned countless imitators, most of whom pay lip service to the buzzword "contrarian," but few can match his performance.
His Kemper-Dreman High Return Fund has been the leader since its inception in the number one equity-income fund among all ranked by Lipper Analytical Services, Inc. Dreman is also one of a handful of money managers whose clients have beaten the runaway market over the past five, ten, and fifteen years.
Now, as the longest bull market in the history of the stock market winds down, there is increasing volatility and a great deal of uncertainty. At the heart of his book is a fundamental psychological insight: investors overreact. Dreman demonstrates how investors consistently overvalue the so-called "best" stocks and undervalue the so-called "worst" stocks, and how earnings and other surprises affect the best and worst stocks in opposite ways.
Since surprises are a way of life in the market, Dreman shows you how to profit from these surprises with his ingenious new techniques, most of wich have been developped in the nineties. Why a high dividend yield is just as important for the aggressive investor as it is for "widows and orphans. Why you should avoid Nasdaq "the market of the next hundred years" like the plague. The author of the critically acclaimed Psychology and the Stock Market and Contrarian Investment Strategy, Dreman is also a senior investment columnist at Forbes magazine.
He resides with his wife and two children in Aspen, Colorado, and on the family yacht, The Contrarian. Introduction Through the summer of the Dow Jones Industrial Average hit new high after new high, continuing the breathtaking advance it began seven years earlier.
It took ninety years for the Average to make its first thousand-point gain. Now it hurdled each new barrier in a matter of months. Since the beginning of the Dow had risen a staggering 3, points, and from the autumn of it had almost quadrupled. The rise had caught virtually every expert flat-footed. Back in , most firmly declared that the Great Bull Market that had begun in was over. A level to moderately down market was the best that could be expected. For years the forecasters were confounded by the rise--although they were loath to admit it.
But as the averages exploded, so did their confidence. By the fall of , the market has become increasingly volatile, plunging hundreds of points in a single session only to more than recoup the loss in the next few trading days. Then, on october 27, it plummeted points, the largest daily point drop on record, before again approaching an all-time high in January, The high volatility continued through the end of and into the new year. What was going on?
In the future, there will, of course, be retrospective answers, or at least you will know what the market did next. But hindsight, in and of itself, has never made an investor money. Some things were clear to me as I wrote this introduction in the first weeks of We were in a raging Bull Market, one so powerful that it eclipsed any other of this century. Never in my recollection or in my study of previous markets have I seen such widespread investor enthusiasm for stocks-- even including the run-up prior to the Crash.
The price of stocks, relative to what we call "fundamentals," is higher than in or in , the years of the two great market crashes of the twentieth century. This market is different, said many experts who called it a "new era. Some have gained international reputations for calling the shots to date. Abby Joseph Cohen, of Goldman Sachs, a gracious and intelligent professional, is the most acclaimed market strategist of our day.
Abby towers over all the other forecasters because of her accurate calls on the skyrocketing market for the past few years.
Ed Yardini, the chief economist of Deutsche Morgan Grenfell, is another "Wall Street Wizard," as he was recently dubbed by a national financial periodical, for being right on the course of the market and heralding a Dow of 15, by the year Or as yet another money manager put it, "With fundamentals like these, what valuation do you put on this market?
I came to Wall Street from my native Canada back in the mid-sixties. Back then the rage was exciting concept companies. We were all making many times our salaries buying them. In fact, a Street job was only the ticket to stay close to the game; our salaries seemed inconsequential--or so we naively thought. No indeed. They shot up five, ten, even twentyfold, all in a couple of years.
In our eyes, investors who bought the staid old blue chips were fossils. They simply ignored the enormous money to be made in these fast-track stocks. Experts and average investors all agreed this market was unique. Many of my colleagues not only lost their tenfold gains, but also their initial capital. I was luckier. Having studied market manias, I came out alive, but still left the better part of my gains on the table. This humbling experience increased my curiosity about markets.
In researching one of my earlier books, I logged a lot of library hours reading the daily financial pages from the years before to try and get a feel for the prevailing mood of the time.
How could those silly investors in the era of flappers and speakeasies really think stocks could go up forever? It was hard to believe they did not realize the enormous folly they were swept up in. Of course, they could not see the future, but it was easy for me to smile, knowing the ending. A historian reading about this market, at the turn of the twenty-second century, might chuckle at the obvious aberrations taking place now, just as I was amused looking back at Perhaps he or she will wonder, what were those late-twentieth-century investors smoking?
Once again, the experts state, "nothing can stop this market," and the public believes. The public backs that belief with a good part of its hard-earned savings. As a result, the number of American households owning stocks and the size of their holdings dwarf any period in the past.
Yes, many of us have heard it all before. But even hearing it and going through the gut-wrenching experience of portfolios literally melting away, as investor perceptions change suddenly and sharply, does not prevent most of us from continuing on a course that almost certainly will end in disaster.
There are methods to determine whether individual stoks or markets really are too high or too low, as well as how to consistently benefit from this knowledge. As this book will explain, in a period of ebullience, you should have a method to know that it is time to dive into the nearest bomb shelter, or better yet, evacuate from the market in an orderly fashion. One thing I can predict: it is almost axiomatic thet the wild enthusiasm of today will be met with the equally unwarranted pessimism of tomorrow.
Back then the market had gone nowhere in seventeen years, and, adjusted for inflation, the Dow was almost back to its prices of the depressed thirties. People were buying art, collectibles, diamonds, precious metals--anything but stocks. All this, as hindsight tells us, just before the greatest bull market of the century began in the late summer of I wondered back then if the American Stock Market was not one of the last truly undervalued investments left. I stated that the rally that had begun in August of that year might be only the opening salvo of a major bull market, possibly one that would go as far or even farther than any we have seen in this century.
I asked, "If this is true, why is it so little recognized? I called it then--and it is now generally known as--"contrarian strategy. It seemed so obvious.
Like a miner who had struck gold, I believed the "claim jumpers" would arrive in droves. The contrarian ideas would be scooped up immediately, soon outdistancing my years of work, perhaps even before my first book was published. Today I know nothing is further from the truth.
Is it because contrarian strategies have proved to be a bust? No, they work far better than I would have hoped twenty years ago. This completely new work, in fact, represents a major expansion of contrarian methods from my original books in the late seventies and early eighties, a result of important new findings in the past few years. In this work, I will introduce four new strategies. These substantially expand the contrarian tools available to you. All have been tested with large numbers of stocks for periods up to fifty years, and display outstanding records.
A number of recent academic studies corroborate this exciting work. The book is written for both the individual and the professional investor, in what I hope is a nontechnical and easily readable style. There are a variety of strategies, some simple, others requiring more experience, but all should allow you to handily outperform the market--no small feat, as we shall see in the opening chapter. Even the detractors of contrarian methods concede this much.
These strategies have succeeded for me personally, but more important they have provided returns well above the market as well as those of all but a small percentage of investors for almost two decades for the hundreds of clients of our firm, Dreman Value Management L.
This Fund, which I have managed since it started, has been ranked, by Lipper Analytical Services, the major mutual fund ranking organization, as the top fund out of in its peer group for the ten years of its existence. It has also been ranked number one in more time periods than any of the 3, funds in the Lipper database.
This is the second important part of the work. It is not enough to have wining methods, we must be able to use them. Sure, the methods are easy to understand and initiate.
But most investors, whether professional or individual, even with the best of intentions, cannot follow through.
Contrarian Investment Strategies
CONTRARIAN INVESTMENT STRATEGIES DREMAN PDF