Risky Business: 3 Best Contrarian Stocks If You Are Looking for Big Gains
Written by
James Holbach
Edited by
Travis Woods
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Beating the market is hard to do when you’re investing in stocks — even most professionals fail to do it over a sustained period of time, although you wouldn’t know it from their paychecks. One of the challenges is that in order to beat the market you more or less by definition have to do something different from the crowd. Let’s say a certain stock is undervalued. A few people notice and start investing — but soon enough the market notices, and as more and more people buy into it, the price is driven up until it quickly becomes over valued and becomes a bad investment. Or it could be the opposite, when a stock becomes unpopular and sells off, driving the price down. It may be unpopular for a reason, but if it can beat those bad expectations it could be a great investment.
This is contrarian investing at its simplest — going against the crowd. It requires conviction, and it won’t always go your way, but if you can’t handle investing contrary to popular sentiment, you’re probably best off with a passive investing strategy. Here are three contrarian stocks to consider now.
1. VF Corp (VFC)
The stock price of apparel maker VF Corp has declined almost 50% over the last twelve months as it has struggled with poor performance — despite owning a portfolio of iconic brands like Vans, The North Face and Dickies. However, the company is in the middle of an attempted turnaround, and while progress has been slow, if they are able to pull it off, those willing to take a chance and invest now could be well rewarded.
2. Paypal (PYPL)
The stock market appears to have largely given up on fintech company Paypal, which is now about 80% down from its 2021 all-time high, despite business results that have been in line with management expectations. The company has been aggressively buying back stock, which can be a signal that management feels their stock is significantly undervalued. Investors who feel that the market has overreacted have a chance to pick up this stock at what may prove to be a bargain price.
3. Occidental Petroleum (OXY)
In a time when a looming climate crisis has most people thinking that the days of fossil fuels are hopefully numbered, a petroleum company may sound like a poor long-term investment. The stock market as a whole seems to agree, although none other than Warren Buffett has been adding the company to Berkshire Hathaway’s portfolio. It’s hard to predict the future of fossil fuels, especially outside of the near-term. However, OXY has been heavily investing in carbon capture technology — while the payoff for carbon capture is highly speculative, if it is successful, it could make OXY a massive winner.
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