2 choices of contrarian actions with a major upside

As a contrarian investor, you invest against the crowd. (It’s the perfect gig if you’re someone who did your own thing in high school – you know who you are.) Contrarian investing means you take, say, stock in the foreign company whose no one is speaking. If you casually slip it to your buddy, “I invest in XYZABC,” he says he’s never heard of it.


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Or maybe you’re investing in a company that’s just emerging from a scandal or crisis. You can also invest in a company that has changed strategy or suffered a temporary setback, such as the loss of a key customer. And that’s the beauty of contrarian investing. Buying stocks of companies no one else knows about means they are the ones saying, “I wish I had invested in XYZABC 10 years ago. In the meantime, you’re sitting on a pile of cash. A word of warning: you will need to take a long view as a contrarian investor, as you wait for the rest of the world to catch up to you.

Here’s an example of your thought process as a contrarian investor: Let’s say the majority of investors decide that COVID-19 is going to wreak havoc on hotel stocks and drain their stocks of hotels and cruise ships . A contrarian investor buys these stocks instead, believing that consumer demand will increase once vaccines and boosters hit the market.

Why invest against the grain?

There are many reasons to consider contrarian investing, and one of the best reasons is to create a considerable margin of safety over the stocks’ intrinsic values ​​and reduce downside risk.

However, contrarian investing means you scour company details, looking for quality companies with great finances, solid business strategies, products that will disrupt their industry (in a good way ) and leaders who are born to lead. You seek bold ideas and put declining industries on the backburner.

Contrarian investors use a lot of market research to their advantage and the biggest goal is to move your capital from overvalued positions to undervalued ones. However, you need to invest in good companies first, otherwise you won’t make any money. No matter how promising an industry looks – if you can’t pick a good company, you won’t make money. (You will want to know your way around a considerable number of landmarks, such as debt ratio (D/E)earnings per share (EPS), price to book ratio (P/BV), price/earnings ratio (P/E), P/E growth ratio (PEG) and more.)

Consider these 2 contrarian actions

Ready to consider contrarian actions? Let’s take a look at three of our top picks.

Elanco Animal Health Inc. (NYSE: ELAN)

Elanco Animal Health Incorporated, of Greenfield, Indiana, is an animal health company, develops, markets and manufactures pet and farm animal products. It creates animal parasiticides and vaccines that protect pets against worms, fleas and ticks under the following brand names: Seresto, Advantage, Advantix and Advocate. Through its Galliprant and Claro brands, the Company also produces therapeutic companion animal health products for pain, osteoarthritis, ear infections, cardiovascular and skin conditions in cats and dogs.

It also creates vaccines, antibiotics, antiparasitics and other products for poultry. It is also known for aquaculture production and nutritional health products such as enzymes, probiotics and prebiotics. The company also offers several Rumensin and Baytril branded vaccines, antibiotics, implants, antiparasitics and other products for ruminant and swine production. The company sells its products to third-party distributors, veterinarians and farm animal producers, including beef and dairy farmers, as well as hog, poultry and aquaculture operations.

Elanco reported full-year 2021 revenue of $4,765 million, an increase of 46%. Earnings per share (EPS) for the year 2021 was $0.97. Fourth-quarter 2021 revenue was $1,113 million, down 2%. Fourth quarter 2021 revenue increased 4%.

Here’s why it’s a contrarian game: The company expects seven approvals and launches and five to seven regulatory submissions in major markets.

The company expects first-quarter 2022 revenue to reach $1,200-1,230 million with diluted EPS of $0.01-0.07 on a reported basis, or 0.33-0.38 dollar on an adjusted basis.

Wells Fargo & Company (NYSE:WFC)

The fraudulent account scandal that rocked Wells Fargo also makes it a good contrarian choice. Banks should do well in the wake of interest rate hikes imposed in the United States by the Federal Reserve.

Wells Fargo & Company, headquartered in San Francisco, is a diversified financial services company. It provides banking, investment, mortgage, and consumer and commercial finance products and services in the United States and abroad. Its four segments include retail banking and lending, commercial banking, corporate and investment banking, and wealth and investment management. Wells Fargo offers diverse financial products and services for consumers and small businesses, checking and savings accounts, credit and debit cards, and home, auto, personal and small business lending services to private businesses, families and certain public companies, as well as guaranteed loans and rentals. cash management products and services. The Company offers products and services to businesses, commercial real estate, government and institutional clients, including corporate banking, investment banking, cash management, commercial real estate lending and services, equity and fixed income solutions, as well as sales, trading and research services. .

The fourth quarter 2021 earnings snippets included $943 million, or $0.18 per share, of a net gain on sales from the enterprise trust services (CTS) business and Wells Fargo Asset Management (WFAM). Net interest income decreased 1% primarily due to the impact of lower yields on earning assets and lower loan balances.

Non-interest revenue increased 27%, driven by strong results from Wells Fargo’s venture capital and private equity affiliate businesses and net gains from the sale of divested businesses. Investment banking fees improved due to higher underwriting and advisory fees and card and deposit fees. Non-interest expenses decreased by 11%. PCL in the fourth quarter of 2021 included an $875 million decrease in PCL due to continued improvement in economic conditions as well as lower net write-offs.

One more tip while you go against the grain

While you wait for the rest of the world to catch up on your excellent investment, why not invest in a company that pays dividends? A dividend is a sum of money paid, usually quarterly, by a company to shareholders from its profits or monetary reserve. This will allow you to reap the benefits in the meantime, while you wait for everyone to notice the benefits of buying the stock you’ve already purchased.

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