Question of the Week

The general investing public is under the opinion that today's new tech stock is going to take off and that its high price/earnings ratio is insignificant. Mary invests with the philosophy that the new tech stock is highly over-valued and that when the stock price is lower and the company begins to show earnings, it may represent a good buy. This is known as:

A) Modern Portfolio Theory
B) Efficient frontier
C) Contrarian investing
D)

Answer:

The correct answer is C).

Mary invests with a contrarian investment strategy, a style that does not follow public opinion and market trends. Contrarian style investing generally places value on solid companies with low P/E ratios.