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.
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Spheria Asset Management is a fundamental-based investment manager with a bottom-up focus specialising in small and microcap companies. Our mission is to achieve strong investment returns for our clients with an emphasis on risk management....