M* - "Contrarian Tilts for Your Portfolio"

[chang]

Noticed this article on M*: "Contrarian Tilts for Your Portfolio - These areas stand to benefit from a global economic recovery" by Amy C. Arnott (any relation to Rob?).

www.morningstar.com/articles/1016672/contrarian-tilts-for-your-portfolio

(Reminder: direct links from ProBoards to M* articles do not work; you must cut and paste the URL into your browser.)

Excerpts (see the article for detailed comparison and analysis of the recommended funds):

In this article, I'll discuss a few ideas for tilting your portfolio toward out-of-favor areas without taking on excessive risk. Some of these areas have already shown glimmers of brighter returns but have still lagged the broader market by fairly wide margins in recent years.

Ideas for Contrarian Tilts
With those caveats in place, here are some ideas to consider adding to your portfolio.

International stocks: Stocks outside of the United States have shown a hint of promise in recent months but have still trailed domestic market benchmarks by a huge margin over longer periods....

Smaller-cap stocks: Academic research has found that smaller-cap stocks tend to outperform over longer time periods even after adjusting for higher levels of market-related risk....

Value: This is another case where academic theory has been jarringly out of tune with market returns in recent years. Value stocks, the theory goes, perform well over longer periods partly because their low prices give them more room to rise....

Sector-Focused Contrarian Tilts
: For the next three areas, I focused on sectors that have not only been out of favor for the past five years but are also trading at a discount to our analysts' estimates of their underlying fair value....

I found it an interesting read.

[rhythmmethod]

Thanks. I find it interesting as well. I plan to implement some of these ideas.

[chang]

Jan 6, 2021 2:41:19 GMT rhythmmethod said:

Thanks. I find it interesting as well. I plan to implement some of these ideas.

Same here. Some of M*s fund picks are open to question, though. E.g., in the foreign category, too much of a value bias IMO (DODFX, OAKIX, FMIJX); and imho VMVFX is a loser.

[Norbert]

I don't know if International and SC are necessarily "contrarian", but Value and, more specifically, Oil & Gas and Finance certainly are.

Still, given the probable Dem Senate victory, it seems risky to touch Oil & Gas (plus costs are declining for alternatives). On Finance, that's a bet on rising rates, isn't it? Is anyone buying these sectors?

[rhythmmethod]

My take-aways are, given where my port is now, regardless of what one calls it:

1. Continue to increase Int.
2. More global multi-cap value. - FLPSX, VGWAX
3. I've been throwing a few $ at XLE over the months when I need an abusive relationship. It was up ~4% today. One day I'll be the top! Then I'll turn it loose.
4. I plan to add to POAGX. I hope its contrarian nature finally comes through.

[nromsted]

Let me just add that I pay for professional managers who I hope will take advantage of these opportunities, as appropriate to the risks involved. That's probably way too optimistic/naive for most of my funds.

I did buy small amounts of VDE in Oct/Nov, just because I thought Energy was undervalued and overlooked (and rightly so) by those professionals given its performance over the past few years. I'm not congratulating myself, just taking a risk.

I agree with Admin(chang) that VMVFX is a loser. But I think it's because the models used by Vanguard Quantitative Equity Group are not particularly good or stable, and result in rapid turnover rather than any management conviction. Although I own it, I'm looking at alternatives.

[FD1000]

Interesting article but predicted.  It boils down to buy sectors that have been lagging for years and this time it may come true.  After years of promoting this it finally may come true ;-)
The dollar weakness also helped some of these sectors and every "expert" now predict the dollar will continue to weaken.  

I especially like the narratives.."International stocks:hint of promise"..."smaller-cap stocks tend to outperform over longer time periods"..."Value: This is another case where academic theory"

Looking at everything, SPY+QQQ are a still a good place to be for most American investors.
I would not gamble on commodities because of their volatility, suit traders and maybe the Dollar will stop weakening because most think it will continue ;-)
SPY covers both growth and value, so I don't need value.
SC sounds reasonable.
International: none in Europe and gamble on East Asia

[Karen]

Jan 6, 2021 15:58:36 GMT nromsted said:

Let me just add that I pay for professional managers who I hope will take advantage of these opportunities, as appropriate to the risks involved. That's probably way too optimistic/naive for most of my funds.

I did buy small amounts of VDE in Oct/Nov, just because I thought Energy was undervalued and overlooked (and rightly so) by those professionals given its performance over the past few years. I'm not congratulating myself, just taking a risk.

I agree with Admin(chang) that VMVFX is a loser. But I think it's because the models used by Vanguard Quantitative Equity Group are not particularly good or stable, and result in rapid turnover rather than any management conviction. Although I own it, I'm looking at alternatives.

My husband says the best in house VG alternative (and maybe the best alternative anywhere) is VWIGX.  It's his #1 foreign holding.  He sold VMVFX a good while ago and replaced it with VWIGX.

[Chahta]

Well part of the article has worked out so far. International and value are up for me over 2% this week. Only ones. 😊

[steadyeddy]

My contrarian bet for the short term is the TLT will move higher. It is right now at the middle of its 52 week range, and I am taking the long position on it (in fact there is a thread in bon squad).