How to tackle contrarian value investing: expert

This week, senior editor Dean DiSpalatro is reporting live from CFA Institute’s 69th annual conference.

In the first few sessions, industry experts offered their views on topics including contrarian value investing and global energy markets. Check out our collection of live tweets below.

Also, keep following @advisorca for more from the conference.

Live Tweets from CFA Institute annual conference

Tweeting live all day from @CFAinstitute Annual Conference in Montreal. Stay tuned. #CFAInvest

Coming up, session on “The case for contrarian value investing” – Rupal Bhansali, CIO, International and Global Equities, with Ariel Investments in New York. She’s being moderated by Margaret Franklin, president of Marret Private Wealth Inc. #CFAInvest

You don’t have to choose between higher returns and lower risk. Contrarian investing can deliver higher returns and lower risk, says Bhansali. He adds that when investing, it’s not enough to be right. You won’t get rewarded for being right if your view is consensus. That’s already priced in. #CFAInvest (Read: How to trade volatility)

Avoiding picking losers is as important as picking winners, says Bhansali. #CFAInvest So, don’t be fooled! Headline cheap stocks can hide a low-quality business that’s deteriorating at an accelerated rate, says Bhansali.

Bhansali: Also be on the lookout for “creative accounting,” i.e. accounting chicanery. #CFAInvest

Contrarian value investing insists on high-quality businesses. You need to buy quality at sane prices; not junk at clearance prices, says Bhansali. Factors such as high barriers to entry and difficult-to-copy products are key attributes to look for when evaluating businesses, says Bhansali. #CFAInvest

If contrarian works so well, why don’t more people do it? We’re wired to take path of least resistance; contrarian is opposite, so tough choice, she adds. (Read: Red flags for equity investors)

Another reason: it’s easy to get on client watch list when investing this way because [clients may wonder] if you know what you’re doing. Contrarians appear foolish, but they’re not.

Another reason is it requires patience to be good contrarian investor. And, says Bhansali, “Patience is in short supply, [while] pandering is in high demand.”

Bhansali screens based on risk, looking for potential value traps and blow-ups. #CFAInvest

A LOOK AT ENERGY TRENDS

Next up is session on trends and changes in global energy markets. Speaker is Amy Myers Jaffe of the University of California, Davis. #CFAInvest

Jaffe: Big oil no longer dominates because private equity and institutional investors are entering and changing the competitive landscape. #CFAInvest

Jaffe: The industry has figured out how to take microscopic particles embedded in rock and process them into flowing oil and gas. That’s game-changing. (Read: How to play energy in a down cycle)

Jaffe says technology and alternative energy development are putting long-term structural pressure on the value of oil and gas assets. So, don’t be surprised if you see periodic price spikes in the interim. There are multiple causes, including geopolitical issues. #CFAInvest

Jaffe: If you think there will be serious climate change regulations, think carefully about the future of your oil and gas assets. #CFAInvest

Certain about oil demand in China? Don’t be so sure—they’re using Uber en masse. “That adds up,” says Jaffe. #CFAInvest

Jaffe: One of the most significant geopolitical actions the U.S. government has taken is allowing export of oil and gas. #CFAInvest