|Most Famous For:||David Dreman\'s name is synonymous with contrarian value investing strategies. His first book, "Contrarian Investment Strategy: The Psychology of Stock Market Success" (1980) is an investment classic. He has authored numerous scholarly investment articles in the Journal of Investing, Financial Analysts\' Journal and The Journal of Financial Behavior. Dreman has also written the highly respected "The Contrarian" column in Forbes magazine for some 22 years.|
It is reported that Dreman came to contrarian investing the hard way. In 1969, Dreman, a junior analyst at the time, was following the crowd as the shares of companies with negligible earnings skyrocketed. He is quoted as saying, "I invested in the stocks du jour and lost 75% of my net worth." As a result of that painful lesson of following the herd, he became fascinated with how psychology affects investor behavior and became a contrarian investor. (For related reading, see Finding Profit In Troubled Stocks.)
In an interview for Kiplinger's Personal Finance Magazine in 2001he explained his approach: "I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time."
- "Contrarian Investment Strategy: The Psychology of Stock Market Success" by David Dreman (1980)
- "The New Contrarian Investment Strategy" by David Dreman (1982)
- "Contrarian Investment Strategies: The Next Generation by David Dreman (1998)
"Psychology is probably the most important factor in the market – and one that is least understood."
"I paraphrase Lord Rothschild: ‘The time to buy is when there's blood on the streets.'"
"One of the big problems with growth investing is that we can't estimate earnings very well. I really want to buy growth at value prices. I always look at trailing earnings when I judge stocks."
"If you have good stocks and you really know them, you'll make money if you're patient over three years or more."
The Greatest Investors: Philip Fisher
MarketsExplore David Dreman's top five holdings, and learn about Dreman's investment philosophy. Discover how the portfolio reflects a contrarian philosophy.
InvestingContrarian trading is an investment style that goes against prevailing market trends by buying assets that are performing poorly and then selling when they perform well. A contrarian trader believes ...
ETFs & Mutual FundsLearn some of the most commonly used investment strategies employed by mutual fund managers or that can be employed by individual mutual fund investors.
TradingLike most allegedly sure-fire methods in the investment industry, this one has its flaws too.
TradingContrarian investors find value in the worst market conditions. Find out how they do it.
Managing WealthLearn about a recently published paper that explores why active value investors underperform.
ETFs & Mutual FundsHere are five ETF ideas that can be used by the contrarian investor.
InvestingFind out how to look at the big picture - even when the market's short-term outlook is less than rosy.
InvestingValue investing has its advantages, but it also has significant drawbacks. We look at the pros and cons.
TradingInvesting while in college can be challenging. Here are 5 tips to help student investors make the most of their college years.