Emerging-market stocks trade at steep 50% discounts to US equities but have stellar growth prospects, according to O'Shaughnessy Asset Management, which added that investing barriers like low liquidity and high costs were falling.Īlden sees opportunity in the following regions: Russia, India, Latin America, and Southeast Asia. Many of Alden's top investing ideas lie overseas. But that's precisely what attracts contrarian investors like Alden to those names. It can be nerve-racking to increase exposure to losing trades - even for big-money institutions, which are largely underweight those beaten-down names, Alden said. While energy has been one of the strongest performers since the pandemic started, it has trailed the other sectors over the past 10 years. She's especially bullish on names in the energy and healthcare sectors, which are less sensitive to the threat of rising inflation because of their decreased exposure to consumers.Įnergy stocks, including midstream energy-pipeline companies, and commodities like copper and gold are undervalued pockets of the market that have been long-term laggards. Mastering the contrarian investing strategyĪlden's contrarian investing strategy requires separating stocks out by sector, as there might be excessive greed in some parts of the market and overly bearish sentiment in others.Įconomically sensitive value stocks that have long been underloved have room to run, Alden said.

This economic cycle has plenty of room to run, Alden said, even if some past market leaders lose steam under the weight of ambitious valuations. It seems troubling that economic growth is slowing as equities trade at valuations typically seen late in economic cycles, Alden said, but there are reasons for optimism.īanks are largely loosening credit standards and demand for credit is high, which are both signs of a healthy economy. 'And so overall, I find that there's more opportunities in the value side of things than the growth side of things, although there of course are opportunities in both.'Īlden isn't calling for a tech bubble to burst like in 2000, but she said stocks may be in for some speed bumps. 'We have one of the biggest gaps in valuation between growth stocks and value stocks that we've had since the dot-com bubble,' Alden said. That highly positive sentiment and lofty growth-stock valuations should make contrarian investors uneasy. The S&P 500 has advanced 19% year to date on the back of remarkable earnings growth.įor months, market participants have viewed every pullback as a buying opportunity, which explains why the S&P 500 hasn't suffered a 5% decline since October. Stocks have enjoyed an unusually strong backdrop in 2021: a once-in-a-lifetime economic reopening, generous fiscal policy, easy-money policy, and progress in the battle against COVID-19. 'Because we all kind of look at the same data, the same big economic data, and I think a contrarian investor has to go deeper under the surface and find bubbles or opportunities that are less obvious.' 'Always ask yourself actively: What is market consensus missing?' Alden said in a recent interview with Insider. Account icon An icon in the shape of a person's head and shoulders.

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