It is very difficult to understand what is being a contrarian. Contrarian does not mean just going against the crowd. I tell investors that crossing a road while you see a truck is not being a contrarian, it is suicidal. Buying DHFL when its price fell to Rs. 290 was not being a contrarian. Buying Indigo now when there is a dispute among its promoters is not being a contrarian. I know many “investors” who bought Jet Airways when its price was Rs. 390.

These are all examples of “how much lower can it fall” theory. You never know. Suzlon is now at Rs. 5. Surely it can’t fall much further – there is only Rs. 5 to go 🙂 .

Being a contrarian is also not about being a Value Investor. Buying and holding Amazon, or even Lupin required a lot of Value Investing thinking, and being a contrarian. However, only a true blue contrarian would have stuck through the dramatic drawdowns. Many people would have sold off – at least partially. So unless you started with a real huge number, you would be now down to a small number.

Being a Contrarian or even being a Value Discovery Investor is not easy. You should be willing to look foolish for real long periods of time. I am fine with underperformance in my equity portfolio – I have Tata Motor DVR which is pulling down my performance, but my portfolio is not subject to a daily MTM and public scrutiny. I am clearly an absolute return investor and can sit for long time with my money sitting in Ultra Short Bond fund. Not sure that a fund manager can do that. In fact he can’t. Look at the FT PE fund – it has only 20% in equity, and has 80% in debt. Most ‘value investors’ would be doing that. However a Contrarian could be BUYING some growth share and writing options in Mnc Fmcg companies. It really takes guts. If you are wondering why many of the top ‘growth oriented’ large cap funds have done badly -it is obviously because of the focused funds performance -only a few scrips have done well. A value investor may not have participated in this rally, but a contrarian could have participated.

First of all for being a contrarian you need to have tremendous humility. The humility to accept that the market gets it right MOST of the times for MOST of the shares. Now Reliance industries had a terrible run for 3-4 years at least. Then it shot through the roof. I was damn, damn lucky to buy it…but have now exited at 1300 – after taking in the bonus. I was happy with the ride, but felt that that best part was over. However, I got it wrong in TaMo DVR – inspite of the fact that a TaMo analyst gave me an opinion very diff from what I was ‘sure’ of. It is not really easy. I am a contrarian to be able to think PnG is overpriced, but humble enough not to go short on a share that is such short supply. I even hold PnG – no sensible value investor should hold it. I do hold. I do not see too much value in many banks too, but I still feel a lot of growth will come from that sector. I am anti Psu, but did enjoy the recent ride in SBI.

So it is difficult to be a Contraian investor, Value Investor, Deep Value Investor in real life. However, it is easier if you do not take a public stand on your PERSONAL portfolio. Defending every action is not easy. However, it is fine to have a mentor (or 2) to discuss your portfolio. Keeps your ego in check for sure.

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