Separating the hype from the fundamentals
In order to outperform, being contrarian isn’t enough, you need to be contrarian AND right. As investment strategist and author, Michael Moubossin wrote; “being a contrarian for the sake of being a contrarian is not a good idea… When the movie theatre is on fire, run out the door.”
Marcus Burns, Portfolio Manager at Spheria Asset Management, says there are four indicators of ‘fad stocks’ that they look to avoid.
Signs you might be holding a ‘fad stock’
- A small, fast-growing revenue line without cashflow or earnings to back it up
- High price-to-sales multiple
- No price-to-earnings multiple – there are no earnings
- The market is focussed on the pedigree of the management or an attractive market, rather than the unproven business model.
In this video, he explains how he manages his emotions when buying unloved stocks.
For further information on Spheria Emerging Companies Limited (ASX:SEC), please click here
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Marcus Burns is a portfolio manager at Spheria Asset Management and is a co-founder of the firm. He has managed Australian, European and global equity portfolios out of Australia and London through volatile market cycles for over 20 years. Marcus...