The Sceptical Investor : How contrarians bet against the market and win - and you can too / John Stepek.

Format:

Book

Author/Creator:

Stepek, John, author.

Language:

English

Subjects (All):

Business--Mathematical models.

Business.

Physical Description:

1 online resource (148 pages)

Edition:

First edition.

Place of Publication:

La Vergne : Mensch Publishing, 2023.

Summary:

Everyone wants to be a contrarian investor.From the hedge funds who bet against the US housing market in the run up to 2008, to George Soros's billion-dollar bet against the Bank of England in 1992, some of the most famous and most profitable trades in history have been contrarian calls.And with the relentless growth of passive investing - investors blindly following the market - the opportunities for a smart investor to profit by betting against the crowd should be greater than ever.Yet being a contrarian is hard work.It takes patience, the conviction to stand by an unpopular viewpoint, and the mental toughness to endure being 'wrong' for prolonged periods of time. Standing out from the crowd goes against our every natural instinct.Which is, of course, why it works.So how do you go about it? There is no single, mechanical investment approach that marks an investor out as a contrarian. Instead, you need to adopt a sceptical mindset: a flexible mode of thinking that allows you to stand back and spot when the market's view of the world is badly out of touch with reality - and the best way to profit when reality eventually reasserts itself.In The Sceptical Investor, John Stepek, executive editor of MoneyWeek, pulls together the latest research on behavioural finance, and examples from well-known contrarian investors, to offer practical techniques to help you to spot opportunities in common investment situations, from turnaround plays to bubbles and busts, that others in the market miss.It won't make you popular and it won't make you famous. But it will make you money.

Contents:

Intro

Contents

About the Author

Foreword by Merryn Somerset Webb

1. What is Contrarian Investing?

Why every fund manager says they are a contrarian

What do contrarian investors actually do?

Why I prefer scepticism to contrarianism

The importance of perception versus reality

If this was easy, everybody would be doing it

2. Why Sceptical Investing Works

Confessions of an inefficient investor

The market is 'kinda, sorta' efficient

Why engineers get frustrated with the market

A better view of markets, from the man who broke the Bank of England

Why it's better to assume that markets are always wrong

3. Why Should I be a Sceptical Investor?

The best alternative to sceptical investing - go passive

Most objections to passive investing come from vested interests

Passive investing is one of the best financial innovations in history

There's more to passive investing than market capitalisation

The metagame and the one thing that doesn't change

The metagame and passive investing

What are the implications of all this?

What's the alternative?

4. Your Big Advantage Over the Professionals

Here's why the professionals can't stop dancing

Reluctant bulls and fully invested bears

The upside of career risk

What's bad news for fund managers is great news for you

5. You Versus the Crowd

A simple model for crowd behaviour

A matter of life or death

Building and defending our models of the world

Terror management theory and investing

What this means for investment

Four ways to remain apart from the crowd

6. Beating Your Brain - Process Versus Outcome

Here are just a few ways in which your brain sabotages your investments

To be a better investor you need to make better decisions

7. How to Use the Media

The magazine cover indicator.

The proof is in the publishing

It's not just asset prices as a whole - it's individual stocks too

The media is a lot more than just newspapers

Why does the magazine indicator work?

8. The Incredible Power of Incentives

The 2008 financial crisis was caused by completely rational behaviour

How incentives can skew behaviour, for better or for worse

CEO pay, misaligned incentives and the damage it does

What can you do about this?

Skin in the game and corporate structure: why is this company listed in the first place?

How Sir John Templeton made over 100m by understanding incentives

9. The Importance of Intellectual Humility

Hubris, meet Nemesis: five warning signs for sceptical investors

How the world's smartest man learned to be a humble investor

How to be more humble

10. How to Spot Bubbles and What to Do About Them

What are bubbles?

Why should you care?

What you need to know about bubbles

Extreme overvaluation

The other key ingredient: extreme enthusiasm

The story of a typical bubble

The tipping point - spotting the top of the market

How to deal with bubbles

The best feature about bubbles

11. Finding the World's Cheapest Markets

Criticisms of the CAPE

The results you get by buying at generational lows

How to take advantage without over-exposing yourself

Two key risks: war and communism

12. The Dangerous Temptation of Making Better Forecasts

How to make better predictions

Brexit, Trump and other political surprises

Find situations where you don't have to predict the future

13. Buying Companies for Less Than They're Worth

What is value investing?

The evolution of value investing - from cigar butts to quality at low prices

How do you calculate intrinsic value?

14. Turnaround Situations, Falling Knives and Profit Warnings.

Why you shouldn't rush to catch falling knives

Separating the recovery plays from the walking wounded

'One-off' incidents: finding the worst-case scenario

The first cockroach is rarely the last - the archetypal profit warning journey

The red flags that scream 'do not touch'

What if a stock I already own turns into a falling knife? Twist or fold - don't stick

15. Finding a Contrarian Fund Manager

1. Look for a defined, transparent strategy and a process that they can explain to you

2. Concentrate! Find a manager with high conviction, low turnover, and no sign of index tracking

3. Buy a small, boutique fund: an independent thinker

4. Skin in the game

5. Low costs and fair fee structures

6. Be patient, diversify and don't chase performance

7. Investment trusts make a good starting point

8. Rebalance - put your portfolio on contrarian autopilot

Conclusion

Acknowledgements

Further Reading

Investment practicalities: how to invest

Investment philosophy: how markets work

Investment psychology: how to be a better thinker

Publishing details.

Notes:

Description based on print version record.

ISBN:

9780857196286

0857196286