UK Accounting Glossary
A person who opposes or rejects popular opinion, especially in stock exchange dealing.
A contrarian is a person who holds a contrary position, especially a position against the majority.
Simply put, a contrarian is an investor who makes investments that are contrary to current market sentiment. For example, if energy stocks are currently all the rage and health care stocks are out of favour, the contrarian will purchase health care issues and avoid energy issues. The contrarian’s thinking is that stocks which are out-of-favour today are underpriced and therefore represent excellent value. When a currently out-of-favour stock swings back into favour in the future and its price rises to reflect its true value, the contrarian will be poised to profit. While taking a contrarian position in the market can be profitable in the long run, many investors find it difficult to ‘buck the trend’ and adopt a contrarian market philosophy. Contrarian investors use fluctuations in market sentiment to create long-term profits.
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This glossary post was last updated: 4th February 2020.