My Contrarian Picks Are (Still) Beating the Market

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LONDON -- In September of last year, I wrote the article "My Contrarian Picks Are Beating The Market," which article summarized the performance of my contrarian picks over the past year, noting that their return was around twice that of the wider market.

This was a learning experience for me -- I had not expected to beat the market. Whenever you spot such an outlier, you are curious to learn more. Over a longer period of time, will the outperformance continue, or will there be a "reversion to the mean"? So I thought I'd revisit this topic in the following year to see how things have progressed.

So here is my update on my picks:

Tip Date

Company

Share Price Change, %

FTSE 100 Change, %

09/07/2012

Barclays

85.7

13.4

14/05/2012

Resolution

23.0

16.7

14/05/2012

First Group

(8.1)

16.7

29/12/2011

Barratt

171.6

14.6

14/12/2011

Fidelity China

26.5

18.9

05/12/2011

Admiral

36.9

14.6

05/12/2011

Inmarsat

48.2

14.6

05/12/2011

Kazakhmys

(38.3)

14.6

02/12/2011

BMW

25.8

14.9

23/11/2011

BSkyB

20.5

24.1

23/11/2011

Aviva

28.5

24.1

23/11/2011

BP

2.6

24.1

17/11/2011

ITV

84.2

17.6

17/11/2011

Vedanta

(12.0)

17.6

 

Average

35.4

17.6


In the original article, my picks' performance was impressive: They were up 16%. They are now up by nearly 36%. My contrarian picks are continuing to beat the market, with a return that is double that of the FTSE 100. And if you add the dividend yield to these numbers, the outperformance is even greater.

Let's focus on some of the best performers:

Barclays
Barclays  was the classic contrarian play. Take a situation where financials are seen as the most unloved, unwanted shares around. Throw in the eurozone crisis and then add the LIBOR rate-fixing scandal. It is a recipe for a share to be totally trashed. But contrarians know this is precisely the time to buy.

Since last summer Barclays has made an impressive comeback, nearly doubling in price. Chief Executive Anthony Jenkins is making substantial progress in sorting out its troubles. And the good news is: I see Barclays as a long-term investment that will continue to increase in price for many more years.

Barratt Developments
I remember a year ago that investing in homebuilders seemed out of the question. We were in the depths of the property slump, and there seemed to be no end in sight to the gloom.

Of course, this meant it was the time to buy rather than sell. Those brave enough to have bought Barratt Developments  then would, by now, have nearly tripled their money.

Could the shares increase further? Absolutely. You might be surprised to hear that, even now, Barratt is only at 20% of its all-time high.

ITV
So, no one's watching TV anymore? Of course, people still are. The nature of television has evolved, with a wide variety of programming available from Sky, Virgin, BT, and Freeview.

But despite the naysayers, ITV  has been holding its own, and Adam Crozier's turnaround of the U.K. broadcaster is working a treat. The company still puts out hugely popular television, which ranges from "Downton Abbey" and "Coronation" Street to the "X Factor." The shares have nearly doubled in value.

Foolish final thoughts
It's been an exceptional year for contrarian investing. I can't guarantee that 2013 will be anywhere near as good, but I am hopeful that contrarian investing will still produce decent returns.

If Ben Graham invented contrarian investing, Warren Buffett was his most famous pupil. Over the years, Buffett has shown his willingness to go against the grain and against the crowd. This ability has resulted in investment outperformance that is unrivaled.

So when Buffett ventures across the Atlantic to make an investment, people take serious note. Read about "The British Business Warren Buffett Loves" in this free report.


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The article My Contrarian Picks Are (Still) Beating the Market originally appeared on Fool.com.

Prabhat Sakya owns shares of Barclays, First Group, Fidelity China, Kazakhmys, Aviva, and BP, but in none of the other companies mentioned in this article. He has taken profits on Admiral and BSkyB. The Motley Fool recommends BMW. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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