TOP DRAWER BOOK REVIEW
by
HL Carpenter

 

The Triumph of Contrarian Investing
by Ned Davis
177 pages; hardcover; $21.95
McGraw-Hill, New York, 2004

Have you been buying investing magazines for clues to the direction of the stock market? According to The Triumph of Contrarian Investing, you might be on the right track.

But instead of believing the articles proclaiming never-ending bull and bear markets, perhaps you should take a contrarian stance. That is, you could consider the information a reflection of public sentiment at a peak, and plan your investing strategy in the opposite direction.

The Triumph of Contrarian Investing presents commentary and graphs to support this theory. With, of course, the caveat that headlines are only one potential indicator of market psychology, and anecdotal besides.

The book – which at 63 pages of substantive text is really more of a marketing brochure for Ned Davis Research – is a primer on behavioral finance. There are also about 100 pages of squiggly-lined technical-analysis charts. If you like peaks and valleys generated by computer graphics, you’ll be in heaven.

Author Ned Davis is a long-time market researcher and historian. He owns his own research firm and is a frequent guest of Louis Rukeyser. According to the author notes, he’s been involved in the stock market since 1966. So you get the idea he knows what he’s talking about.

The problem is this: If contrarian investing is a way to ‘beat the market’ (a term included in the book’s subtitle), how come Mr. Davis is writing a book about it, instead of sitting comfortably on the list of the world’s richest people, right up there with Warren Buffet?

The reason could be selection bias.

Or perhaps it’s because the more lucrative approach to the stock market is to sell services that guide others – which certainly explains the multitude of investment strategies and theories.

Is going against the market really a winning strategy? The Triumph of Contrarian Investing contains the answer: Think for yourself instead of blindly following the herd mentality.

You might choose to apply that maxim to the book, as well as your investment portfolio.

 

Review originally published March 2005.