Being contrarian can be very lucrative

[skyQuake]

I think that trade was there on Thursday at the close.
Even that would have been a bit of stab in the dark.
I'd find it rather hard to long after Fridays bounce.
Not sure what could make you think that?

Buying thurs close would indeed be stab in the dark. No edge, just gambling.
Its in dead cat bounce mode so long bias is far easier to play
Bought some fri, would be adding monday, but selling up-spikes

 

[robusta]

I thought a number of posts in the last few weeks on stocks justified reviving them under this thread, as being views of contrarian investors about to jump in. The stocks discussed were:

LNC - Linc Energy
CKF - Collins Foods
WHC - Whitehaven Coal (this came from the AFR)
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering

Grateful any thoughts on other contrarian plays (especially if you're onto something that Orbis is doing in this space), or whether you think any of the above remain in the 'falling knife' category.

Perhaps we should look towards Europe, TSM or MUE?

Others may know of more ASX listed stocks with European exposure.

 

[StumpyPhantom]

Perhaps we should look towards Europe, TSM or MUE?

Others may know of more ASX listed stocks with European exposure.

Thanks for the suggestion. So the list of 7 is:

MUE - Multiplex European Units
TSM - Thinksmart Limited
LNC - Linc Energy
CKF - Collins Foods
WHC - Whitehaven Coal (this came from the AFR)
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering

IF there are any other suggestions, I would be grateful for them. Otherwise, does anyone have a number 1 pick from the above (and why). Alternatively, if anyone has a view that one shouldn't be on that list, please also say so.

 

[StumpyPhantom]

Perhaps we should look towards Europe, TSM or MUE?

Others may know of more ASX listed stocks with European exposure.

Thanks for the suggestions. The list of 7 starters is:

MUE - Multiplex European Units
TSM - Thinksmart Limited
LNC - Linc Energy
CKF - Collins Foods
WHC - Whitehaven Coal (this came from the AFR)
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering

Does anyone have a number 1 pick from this list (and why)? Alternatively, would like to hear from you if one should be dropped off (or another added).

 

[skc]

Thanks for the suggestions. The list of 7 starters is:

MUE - Multiplex European Units
TSM - Thinksmart Limited
LNC - Linc Energy
CKF - Collins Foods
WHC - Whitehaven Coal (this came from the AFR)
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering

Does anyone have a number 1 pick from this list (and why)? Alternatively, would like to hear from you if one should be dropped off (or another added).

Here's a few I've been watching:

BTA
ZGL - probably same exposure as MCE
WTP
STB - potash was pretty for a while
DTE - at about 2x cash backing now
WEC
IAU
LYC

Except BTA which is a biotech, 2 are mining services while the rest are all commodities. The last three have company-specific problems as well as general commodity headwind.

Re MBN... there are deadcat bounces then there are voluntarily admin... risk would have to be at least 50% for me so even a 30% spike would only be a 0.6R trade for me.

 

[StumpyPhantom]

So the present list (apologies if I've missed any) is:

BTA - Biota Holdings Limited
ZGL - Zicom Group Limited
WTP - Watpac Limited
STB - South Boulder Mines Limited
DTE - Dart Energy
WEC - White Energy
IAU - Intrepid Mines
LYC - Lynas Corporation
MUE - Multiplex European Units
TSM - Thinksmart Limited
LNC - Linc Energy
CKF - Collins Foods
WHC - Whitehaven Coal
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering
QBE - QBE Insurance
AMP - AMP Limited

Is the consensus on MBN is that it should be eliminated from this list?

 

[skc]

MBN should have a bit of a bounce in the short term at least. Though they have mentioned capital raising so gotta watch out for that too.

And there you go. They definitely left this a bit late, considering that 6 months ago, the share price was 5x today's price.

 

[Chasero]

And there you go. They definitely left this a bit late, considering that 6 months ago, the share price was 5x today's price.

Why do nearly all stocks get a huge PUMP and then a C/R?

Wonder how it'll open

 

[StumpyPhantom]

Little did I know, at the time of re-starting this thread on 13 May, that the XAO would break below its 200MA the next day.

So whilst it's a little difficult to continue describing stocks mentioned here as 'contrarian' when everything else is also tanking, it's still worth collecting in the one place that group of stocks that might be the first to present the best value when this 'dive' is over.

I've eliminated all the resources (and related) stocks on the basis that whatever global dive we come out of, demand for resources will lag behind at least 12 months, unless an exceptional case can be made for its retention.

So the list now is:

BTA - Biota Holdings Limited
ZGL - Zicom Group Limited
WTP - Watpac Limited
MUE - Multiplex European Units
TSM - Thinksmart Limited
CKF - Collins Foods
QBE - QBE Insurance
AMP - AMP Limited

Eliminated list:

STB - South Boulder Mines Limited
DTE - Dart Energy
WEC - White Energy
WHC - Whitehaven Coal
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering
IAU - Intrepid Mines
LYC - Lynas Corporation
LNC - Linc Energy

It's a pretty sad indictment of the Australian economy that any list of stocks without resources and energy looks pretty thin on the ground, so grateful any argument to put them back in (or indeed any additions of non-resources stocks to the list).

 

[Ves]

I've eliminated all the resources (and related) stocks on the basis that whatever global dive we come out of, demand for resources will lag behind at least 12 months, unless an exceptional case can be made for its retention.

So the list now is:

ZGL - Zicom Group Limited

Isn't this one influenced by demand for resources to an extent?

 

[So_Cynical]

I've eliminated all the resources (and related) stocks on the basis that whatever global dive we come out of, demand for resources will lag behind at least 12 months, unless an exceptional case can be made for its retention.

Where were you in 2008? the resource stocks fell first and RECOVERED first...my first wave of profits back then was from gold stocks that had bounced 15 > 25% of their Aug > Oct 2008 lows.

Perhaps the biggest true contrarian punt at the moment is Gold and Oil.

 

[skc]

I've eliminated all the resources (and related) stocks on the basis that whatever global dive we come out of, demand for resources will lag behind at least 12 months, unless an exceptional case can be made for its retention.

Not sure this is true. The inherent leveraged nature of material stocks means that they will rise quickly if the commodity prices start rising. Mining services however will have some lag as project decisions take more time.

 

[odds-on]

DJS is on my watchlist. The share price is falling like a stolen car off a cliff. From my research there is going to come a point where if the share price keeps dropping it will be approximately the price of the DJS property assets. The contrarian in me does not believe in this death of retail fear, just think it is cyclical lows. If DJS can be purchased at approx property assets value i think this provides some margin of safety whilst one waits for the cyclical lows to end. My interpretation of the strategic direction presentation is that it will take a few years. My

 

[odds-on]

TFC?

 

[StumpyPhantom]

OK, so the updated list takes into account comments in the last 24 hours, re-inserting the resources stocks but keeping the mining services ones on the sidelines.


BTA - Biota Holdings Limited
WTP - Watpac Limited
MUE - Multiplex European Units
TSM - Thinksmart Limited
CKF - Collins Foods
QBE - QBE Insurance
AMP - AMP Limited
STB - South Boulder Mines Limited
DTE - Dart Energy
WEC - White Energy
WHC - Whitehaven Coal
MBN - Mirabela Nickel
IAU - Intrepid Mines
LYC - Lynas Corporation
LNC - Linc Energy
TFS - TFC Corporation
DJS - David Jones Limited

Eliminated list:

MCE - Matrix Composites and Engineering
ZGL - Zicom Group Limited

Anyone with gold and oil stocks that make this list?

And just so that no-one is deluded that the above is a 'buy' list, here is some conventional wisdom/definition of being a contrarian, with the construction industry an example:

There is a lot of value that can come from a contrarian investment approach. When Internet stocks were soaring in 1999 and early 2000, contrarians who decided that valuations were absurd, watched from the sidelines as market watcher called them out of touch for missing out on big gains. The contrarian had the last laugh, however, as those same market watchers watched with embarrassment as those gains vaporized quicker than they accumulated.

The Intelligent Contrarian
Yet, being a contrarian merely for the sake of going against the crowd is not smart, if there is no intelligent basis behind it. After all, the collective wisdom of a crowd can often be more useful than one individual's information; the market is usually an efficient arena. But every so often, market pessimism gets so extreme that emotions trump rational thinking.

Today, the housing industry is so depressed that valuations are at rock bottom levels. To be sure, virtually any business that derives a significant portion of its sales from residential real estate, is losing money today and has been for a few years now; the picture doesn't look encouraging next year. As a result, very few people want to own housing related stocks and for good reason. A contrarian, at the minimum, will look a little closer to see if going against the grain here is a worthwhile endeavor. (Contrarian investors find value in the worst market conditions. For more, see Buy When There's Blood In The Streets.)

The Bottom Line
A contrarian bet can have a substantial payoff for patient investors, but offsetting the huge reward is finding out the crowd was right. Contrarian investors, by their nature, are very research intensive. Before going against the grain, make sure you are well equipped with facts.

 

[odds-on]

ZGL on a US investing website

http://www.gurufocus.com/news/177403/zicom-group--zglau--extremely-mispriced-growth-business-

 

[So_Cynical]

TFC?

LOL so im not the only one looking at this hey...its a super punt though on paper doesn't look that bad, and has phenomenal potential...in 10 years time these guys could have 300 > 400 mill (my figures) in annual revenue just from actual forestry production.

TFC is Most certainly on my short list....but probably only for a half a position, money i can afford to lose.

Anyone with gold and oil stocks that make this list?

BPT
PGI

 

[StumpyPhantom]

LOL so im not the only one looking at this hey...its a super punt though on paper doesn't look that bad, and has phenomenal potential...in 10 years time these guys could have 300 > 400 mill in annual revenue just from actual forestry production.

TFC is Most certainly on my short list....but probably only for a half a position, money i can afford to lose.

The key to the 'contrarian' nature of this play seems to me to be when their first large-scale harvest is going to happen.

Does anybody know when this is scheduled?

Their only money-making ATM seems to be selling more MIS and plots to big investors, but like the stupid ostrich-farming boom 15 years ago, it will only be viable once we're all able to tuck our bips in and eat every part of that bird for more than the $10k they charged for each such 'breeding bird'.

 

[So_Cynical]

The key to the 'contrarian' nature of this play seems to me to be when their first large-scale harvest is going to happen.

Does anybody know when this is scheduled?

Their only money-making ATM seems to be selling more MIS and plots to big investors, but like the stupid ostrich-farming boom 15 years ago, it will only be viable once we're all able to tuck our bips in and eat every part of that bird for more than the $10k they charged for each such 'breeding bird'.

Harvest of the first wood lots is coming up, acreage im not sure of but wont be much and will certainly build over the next 3 or 4 years...ill email them and ask for hectares by age class.

TFC along with SHV are the only MIS based stocks still going as far as i know :dunno: all the others went under, so the fear of investors in this sector is understandable....however TFC seems to have successfully moved away from the retail MIS funded model to a sophisticated investor one.

And paid out their traditional bank debts..have cash, and have a viable product that's both financially and environmentally sound on a real world forestry costs basis...and yet the share price has been in (trend) decline for almost 4 years.

 

[StumpyPhantom]

Qualified as a true contrarian then, with its own timetable and less subject to the commodities roller coaster.

The task now is to scrutinise the other candidates (and add others)