“Be fearful when others are greedy, and greedy when others are fearful.”
– Warren Buffett
What does it mean to be a contrarian?
In a nutshell, being a contrarian means that if everybody is going one direction, you’re doing the opposite.
This is how great investors can make a lot of money.
They find undervalued or out-of-favor assets and get in when everyone else isn’t interested.
Today, I’ll share some success stories.
I’ll also share exciting opportunities I’m seeing right now.
Let’s jump into it!
1. Market Conditions
Inflation has been raging for a while now with prices for many items 30-50% than just 4 years ago.
We’re seeing the stock market continuously fluctuate.
There has been lots of volatility in investments like crypto.
This isn’t the first time this has happened.
Market conditions change all the time.
It’s no wonder so many people are afraid of a market downturn.
Volatility can be pretty scary!
Honestly, the time is never really right to be an investor.
But it’s still important to pay attention to what’s happening.
Conventional wisdom will tell you to listen to your financial advisor.
Listen to the talking heads on TV.
Listen to the articles saying what’s hot right now.
But if you do any or all of those things, you will not do well.
If you see your investment on the front page of Forbes magazine, it’s time to consider selling.
I have a friend who bought Nvidia 10 years ago.
It’s recently become the largest public company in the world.
It had something like a 10,000% increase in market value.
That’s some phenomenal growth!
The stock might go up another 50%, but there’s not a lot of room left to go after that.
When you’re the largest company in the world, the stocks will come back down at some point.
If you’re invested in that kind of company, it’s important to try and find other investment opportunities.
You should look for investments that will grow.
2. Opportunities in Uncertainty
Warren Buffett says the best investing trait is temperament.
You shouldn’t panic when things go bad.
We saw this in 2008.
What did you do back then?
Did you sell?
Did you hold?
When the market is crashing, it might be time to stand your ground rather than run.
If you love the company, staying could really pay off.
In the book Hedge Funds: Evil or Angels in Disguise, a chapter by finance expert Stephen Todd Walker says the best time to invest is when it appears to be the worst time.1
Buffett even backs this up.
He says that short-term uncertainty is the friend of the investor with long-term values.
I’ve talked individually with 2,500 investors the last few years.
So many of them will say that they’re waiting.
Well, if you wait for things to settle, you’ll be too late.
That’s why it’s important to get in when things are unclear.
Let’s talk about a few examples.
In 2008, Michael Burry was a medical fellow.
You might recognize his name from The Big Short.
At this time in the housing market, there were subprime mortgages.
Burry saw the whole system as a house of cards that would fall apart.
So what did he do?
He turned $100 million of investor money into about $1 billion over ten years.
His success didn’t happen without challenge, of course.
Investors tried to sue him to get the money back before he took all the money out.
Even a lot of investors then were having trouble being contrarian.
It’s a pretty amazing story.
A 10x return in that short period of time is nothing short of miraculous.
Amazon during the dot-com bubble is also an inspiring story.
In the early 2000s, a lot of tech stocks went to zero.
Amazon was still a great opportunity.
People who were paying attention found the Internet sector, or e-commerce.
They were able to buy Amazon stock at a super cheap rate when everyone else was selling.
Another asset people bought in the early 2000s was gold.
Gold was around $200 to $250 an ounce.
At the time of writing its $2,600+
If you bought gold 20 years ago, you would have made 10x on your investment by now.
3. Current Contrarian Investments
So, as a contrarian, what do I like?
Currently, I’m loving multifamily investing.
I’ve been a big multifamily guy.
We’ve taken around a two-year break of doing new multifamily deals because of the challenging debt situation.
We’re seeing some opportunities now that are discounted 20% to 30%+ in phenomenal markets like Dallas or Charlotte.
In an economy where everything is more expensive, multifamily apartments are way cheaper than even a few years ago.
It’s a perfect opportunity for growth.
According to this article on managing risk in apartment development, multifamily is among the first asset types to recover from economic downturn.2
The second asset I like is precious metals.
I didn’t really understand them until about 5 years ago.
They’re not everyone’s cup of tea.
But now I think it’s a great way to store value instead of holding cash.
(Check out my video on precious metals here!)
The third asset I’m really liking right now is cash-flowing businesses.
It’s hard to find anything that’s providing cash flow these days.
Most real estate deals are providing very little cash flow, if any.
So, when we find real estate deals that provide cash flow, we’re very excited!
The businesses we’re involved with are selling sometimes for up to 5x earnings.
This can be financed, which we are currently looking into.
You can operate one yourself or be a passive investor with groups that buy businesses like ours.
We operate the businesses and offer cash flow to investors.
At the end of the day, you should find your own investment strategy.
When you look at your investments, ask yourself:
Is this asset in favor right now?
Can you see it featured on the front page of Forbes?
If you’ve been invested for a while, it might be time to move on.
Find some other things that are out of favor.
Currently, computer chip manufacturers are stock market darlings.
A lot of tech companies look great on the surface as far as valuations.
Remember: There are other assets out there.
Don’t overlook investments just because they’re not as exciting.
If you want to be a great investor, you need to be open to all sorts of different opportunities.
Now I want to hear from you!
How will you be a contrarian in your investments?
Let us know in the comments.
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
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Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.
Works Cited
1. S. Walker. “Hedge Funds: Evil or Angels in Disguise.” (2014): 113-145. https://doi.org/10.1057/9781137370198_8.
2. M. Louargand and Brian T. Murdy. “Managing risk in apartment development.” Briefings in Real Estate Finance, 2 (2002): 203-209. https://doi.org/10.1002/BREF.67.
