Dogs of the Dow" on steroids approach. As I scanned the audience, I noticed slight nods as he described his methodology. You could almost feel the "hey, I can do this too" idea forming in the audience's brain - the same sort of thing you see when Buffett or Munger speak.
Then came the point where the golden goose pulled out a small piece of paper from his suit jacket and announced he wanted to go over some of his recent buys. The audience edged further on its seat and pens came out of pockets, poised over napkins - ready to scarf up the golden eggs.
His first choice was General Public Utilities (GPU). The color drained from the audience's face and pens stopped mid air. Should they write it down or what? As the money manager listed the metrics, including a price in the single digits that was down sharply, a low P/E ratio and all the rest, the audience reflected on the fact that GPU owned Three Mile Island - a utility in Pennsylvania that had just experienced a nuclear meltdown.
I have to admit that I walked away from the presentation chuckling. In case you're wondering, the money manager ended up hitting a huge homerun (actually into the upper deck) with GPU.
These thoughts came to mind recently as I read a recent recommendation to buy ETFs that track European stocks by Mitch Tuchman of MarketRiders. An example is VGK from Vanguard. It returned -11.63 in 2011 as U.S. stocks were marginally positive.
Most investors are well aware of Europe's problems and the economic uncertainty surrounding the region. Those who follow events closely are treated to what amounts to a daily 3-ring circus as leaders play a cat-and-mouse game, constantly meeting and presenting vague baby steps towards solving their problems. Investors nervously eye bond auction yields as an indicator to the market's assessment of events.
In contrast, the contrarian thinks about the market years ahead. The contrarian sees beaten down prices and a market several years in the future when today's problems will be long past. The contrarian sees today's problems as an investment opportunity.
I agree that investors with a contrarian bent will likely profit from taking a long-term position in a well-diversified, low-cost ETF comprised of European companies. In terms of the portfolio's overall positioning in global markets, I would limit exposure to 20%; but this would depend on individual risk preference. As a point of reference for future tracking, VGK closed at $41.96 yesterday and SPY (S&P 500 ETF) at $129.51.
Disclosure: The above is for educational purposes. Individuals should do their own research or consult a professional before making investment decisions.
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