Chapter Ten

The Importance of Being Contrary

Don’t Follow the Crowd

I can hear you asking: How on earth, when all the smart money was running scared out of Thailand at the height of Asian contagion, could it have possibly made sense to buy there?

For the right answer to a good question, let’s take another look at a pet phrase from Sir John Templeton: “To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude but pays the greatest rewards.”

Now, the emphasis here is on the value placed on an asset by sentiment, as opposed to pure, dispassionate logic. Despondency and greed are emotions. They aren’t about thinking, but feeling. You may feel in your gut that a stock is going to go up, but you’re better off testing that hunch against the hard-core reality of a corporate balance sheet and such things as the competitive environment.