Contrarian Investing

You know that feeling.

The one after watching a movie that has been hyped to the stars.

You wait in long lines to buy tickets and popcorn, jam into the last seat available, and what happens?

Yawn.

The movie fails to meet the hype.

Contrarians might say that's what happens to those who invest in popular stocks.

Sure, certain stocks have outperformed others. But what's driving the performance?

It may simply be popularity. If so, contrarians will tell you that's not a good value.

Instead, contrarian investors go against the grain, looking for good companies that have fallen out of favor.

This strategy was popularized in the 1980s by David Dreman.

So what values are contrarians looking at now?

How about oil values?

They look bad: Gas prices just aren't what they used to be, and there's a glut on the world market.

But take a contrary view, look beyond the moment, and consider the inherent value of oil. After all, everyone needs oil.

Contrarians might argue that oil stocks are undervalued and, when they rebound, will outperform the market.