There are all too many pseudo-contrarians who do not understand how (and when) these sentiment indicators work; I saw one that claimed the Housing posts on this blog were a buy signal for the Homebuilders.
Now readers of this blog can go back and see the series of posts on The Big Picture during the period I mentioned and come to their own conclusion.
More than that if you want to learn something about real contrarian trading see the Reuters screen I have mentioned here couple of times. That screen buys weakness, many times 52 week low and is the best performing screen amongst all Reuters screen. You can backtest it and see for yourself.
If you apply a little bit of independent thinking you will also understand why it works.
April 21, 2006 Post
The Reuters stock screener is an excellent free tool. More than that you can get many good ideas from their standard screens. Look at the performance of their screens:
Indexed vs S&p vs NASDAQ
All Reuters Select Screens 312.12 +217.34 +252.94
Growth Screens 268.26 +173.48 +209.08
Accelerating EPS Growth 213.38 +118.61 +154.21
Relative Growth 453.33 +358.56 +394.15
Relative Momentum 163.80 +69.03 +104.62
Rising Expectations 174.45 +79.68 +115.28
Sales Growth Leaders 481.20 +386.43 +422.03
Value Screens 391.59 +296.82 +332.42
Contrarian Opportunities 1,489.57+1394.80+1430.40
Favored Value Plays 483.66 +388.89 +424.48
Income Stocks 227.81 +133.04 +168.64
Growth At A Reasonable Price 280.77 +186.00 +221.60
Relative Value 440.17 +345.40 +380.99
Quality Screens 285.14 +190.37 +225.96
Fastest Turnover 302.15 +207.38 +242.98
Industry Leaders 260.18 +165.41 +201.01
Return On Investment 197.46 +102.69 +138.29
Strong Operating Margins 394.46 +299.69 +335.28
Sentiment Screens 309.65 +214.88 +250.48
There are many ideas to work with in them. All of them beat the indexes handsomely, are mechanical and free to use. There is extensive detail on the methodology and philosophy behind each screen. Registration is required to access them. A good assignment for weekend.
Update:
What stocks does the Contrarian screen show today
CHS, IEHC, MGRC, PSUN, MLS
Now that screen outperforms S&P by +1097.97 and Nasdaq100 +1139.85. That is real contrarian system.
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