No. of Recommendations: 3
Don't you think you're going against the flow for no reason.

Against the flow, yes. But not for no reason.
(the reason may not be right, but there is a reason!)

The screen you mention will be very much like so many others, and
will pick the same old momentum stocks, generally at high valuations,
and with a big vulnerability to a drop in a bad storm. A blend of
such screens isn't really going to offer true diversification.

The one I suggest is chosen specifically to be contrarian: it will
tend to pick stocks which are very much out of fashion, a little more value
oriented, and often at pricse which are below each stock's typical
valuation. And of course, all the stocks have very strong financials,
or they wouldn't be rated safety=1. Note the perfomrance in October 1987:
-4.4% isn't so bad for that particular month. Out of fashion stocks
tend to react very little to bad surprises, and very strongly to
good surprises, so you get positive skew on your volatility.

So, my thinking is that if you can get even modestly market-beating returns
with below-market risk, it might make sense as part of a diversified portfolio.

Another reason I suggest this screen is that it might be quite timely in the next year. Maybe.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.