Tuesday, May 5, 1998

An Ode to the Contrarian
by Maria Bowman ([email protected])

What does it mean to be a contrarian? In investing, contrarians generally go against the "crowd." They may have been bulls in the economic malaise of the Jimmy Carter years; during this extended bull market, many of them have been bears warning that "the bubble" is going to burst any day now, like it did in that tulip disaster in the Netherlands centuries ago. Despite their pessimism they may still be almost fully invested, but probably in hard metals rather than in hard drives, and in insurance rather than in internet companies. Anyone who has read Barron's or Forbes or has watched CNBC on Friday mornings has read or has heard the ideas of a so-called contrarian or two.

Something bothers me, though, about how this term contrarian has been maligned. I have never invested in the Prudent Bear Fund, and have never shorted or bought puts on Iomega, Yahoo!, or American Online, as many "contrarians" have done in recent years. Indeed, I do not even own a bow tie.

Nevertheless, I still consider myself a contrarian, not in the traditionally narrow sense of the term, but in a more inclusive one. You see, the genuine contrarian, for example, never buys stocks because he or she has received a tip from a broker, a neighbor, a friend from work, or even from an individual investor who runs an out-performing online portfolio.

Rather, contrarians think for themselves. Always. They know about the companies they own and can explain the reasons why they own them. They have ideas about how long they are going to hold them, whether it be a month or a lifetime. They really do not care if some analyst has downgraded their company to a "hold," or if some pundit on Wall $treet Week recommends that viewers dump the stock on Monday. However, they acknowledge that they inevitably bring their fallibility to the investing table. They know they have made mistakes, even ghastly ones, but they take full responsibility for them and do not blame the market if they lose money, as if stocks are like dogs who can jump and roll over on command. They are confident, yet humble.

If you can defend your investment philosophy and make your own decisions based upon research, analysis, and conviction, guess what? You're a contrarian!

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