David Dreman of Dreman Value Management says, “the outlook for the market couldn’t be murkier” in a Forbes column. He notes that corporate revenues and profits for the S&P 500 are slightly down from 2014 to 2015, but that the P/E ratio for the S&P 500 is above its long-term average. Overall, he predicts “that 2016 will be a year without significant movement up or down.” Further, he recommends value stocks, particularly in cyclical, energy companies, and mining outfits. Along with noting their cheap price and highlighting the importance of investing in solid companies, he observes that it is possible “energy stocks can come back sharply with any cuts in the oil supply by OPEC” but that it is impossible to predict when that may happen. Likewise, he anticipates “a big rebound in the commodity complex, albeit one that is impossible to time precisely.”
Tag Archives: David Dreman
Contrarian guru David Dreman says that, while he sees a couple of big economic risks for the US right now, he’s still bullish on the stock market. Why? Because there just aren’t other attractive options.
In his latest Forbes column, Dreman says that the lack of wage growth for the middle and working classes and misguided Federal Reserve policies are big concerns. But there’s nowhere else to turn for decent returns, he says. “The chance of a 5% to 10% return on equity investments sure beats 3% on 30-year Treasurys,” he writes. “Remember that inflation is the enemy of long bond holders. A 1% rise in rates results in an 18% drop in principal on a 30-year bond. By contrast, inflation has always been a major supporter of stocks over time. Since 1945, for example, the dollar has lost 92% of its purchasing power. The Dow Jones industrial average, by comparison, is up 93 times from the beginning of 1946.”
Dreman says he thinks the best way to invest given lofty market valuations is to buy bank stocks. “Financial institutions are now finally emerging into a new, far more positive world,” he writes. “Most have adjusted to the new heavily regulated environment, and loan demand is rising. Higher interest rates should increase spread income over time. Importantly, American banks have some of the lowest loan-to-capital ratios in the world. This combination should result in both higher dividends and appreciation over the next few years.”
Can a single page of a book change your investment life? We believe it can. Periodically, we highlight some of the Great Pages that have had a great impact on our investment philosophy. Today, we look at a page in David Dreman’s classic “Contrarian Investment Strategies”, in which Dreman shows that the stock market is far more resilient than many give it credit for — which has tremendous implications for how to invest when crises occur.
Contrarian guru David Dreman says policymakers have created “a form of financial Ebola” that is threatening to wipe out the savings of many Americans.
Contrarian guru David Dreman says the Federal Reserve has been playing a dangerous, unsuccessful game by keeping interest rates so low for so long. But he says there are ways for investors to cure the “easy money hangover.”
In an interview with Steven Halpern for MoneyShow.com, Validea CEO John Reese recently talked about the Guru Strategy he bases on noted contrarian investor David Dreman.
Every other issue of The Validea Hot List newsletter examines in detail one of John Reese’s computerized Guru Strategies. This latest issue looks at the David Dreman-inspired strategy, which has averaged 6.5% annualized returns since its inception more than 10 years ago, beating the S&P 500. Below is an excerpt from today’s newsletter, along with several top-scoring stock ideas based on the Dreman-based investment strategy.