Contrarian Investment Ideas for 2015 and Beyond

SPECIAL REPORT: Stock and fund ideas for investors who are putting new money to work and don't mind some short-term volatility along the way

Christine Benz 16 January, 2015 | 8:00AM

Whether you're playing sports, managing a business or raising a teenager, anticipating what's next will usually hold you in good stead. The same can be said of managing your investments. If you're rebalancing your portfolio or initiating new positions—funding your ISA, for example—it’s wise to do so with a contrarian mindset. Last year's winners will rarely make for a good shopping list because their valuations are often inflated. Instead, when deploying new assets, you're usually better off looking to parts of the market that have underperformed and may be due to recover. 

Of course, beaten-down pockets of the market may be cheap for good reason, and that should be of particular concern for contrarian types today. As investors have been in "bring on the risk" mode for five-plus years, you can bet that they'd be pouncing if easy opportunities were hiding in plain sight. Most of today's beaten-down market pockets are in the dumps because of some combination of falling energy prices, concerns about global economic malaise, and too-low inflation—intertwined issues that won't resolve themselves overnight. 

Thus, investors aiming to capitalise on the markets' down-trodden pockets today should make sure they fully understand the fundamentals (including the bear case) of any prospective investment, have an appropriately long time horizon to capitalise on a potential recovery, and keep those more speculative positions to a small part of their portfolios. Alternatively, investors who would rather not buy individual stocks or sector-specific ETFs might consider delegating the contrarian decision-making to a good value-oriented stock-picker who can conduct due diligence on their behalf. 

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BHP Group PLC1,608.80 GBX0.34
BP PLC205.50 GBX2.04
Exxon Mobil Corp34.16 USD-2.01
Philip Morris International Inc74.45 USD-0.55
Rio Tinto PLC4,578.00 GBX0.69
Royal Dutch Shell PLC B940.60 GBX2.84
Tullow Oil PLC21.63 GBX9.24
Woolworths Group Ltd38.82 AUD0.26

About Author

Christine Benz

Christine Benz  is director of personal finance at Morningstar and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances.

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