Contrarian investing

Contrarian investing means deliberately taking a position against the prevailing mood of the market, buying what the crowd is currently avoiding or avoiding what the crowd is currently rushing toward. It rests on the idea that sentiment can push a price further than the underlying business justifies, in either direction.

Being contrarian is not the same as simply disagreeing with the crowd for its own sake. A contrarian position still needs its own reasoning, a specific explanation for why the crowd's current view is wrong and what would confirm or disprove that. Buying a stock only because everyone else is selling it, with no independent case for the business, is not contrarian investing, it's just the opposite mistake.

Contrarian positions can take longer to work out than the market's patience allows for, since sentiment can stay extreme well past the point where the facts justify it. That's part of why the approach demands a clear thesis and a willingness to hold a position while it remains unpopular, rather than treating short term price action as proof of being wrong.