Fraser

philosophy

"When everyone thinks alike, everyone is likely to be wrong."
~ Humphrey Neill, The Art of Contrary Thinking

The above quote succinctly captures the essence of contrarian thinking. While simple in theory, the task of capturing the prevailing sentiment can be as elusive as defining the boundaries of a cloud. James Fraser, our mentor, worked closely with Humphrey Neill to develop the Theory of Contrary Opinion and apply it to the investment management process. Neill said “The art of contrary thinking consists in training your mind to ruminate in directions opposite to general public opinions; but weigh your conclusions in the light of current events and current manifestations of human behavior. Thrust your thoughts out of the rut. Be a nonconformist when using your mind.”

Our investment philosophy is unique and artistic. We study investment themes utilizing the Theory of Contrary Opinion. The philosophy is based on the often overlooked assumption that human perceptions, and the actions resulting from these correct or mistaken perceptions, influence stock prices. The contrary investor studies crowd behavior in order to profit from his or her understanding of the psychology of the market.

As equity managers, we apply Contrary Opinion in two ways to earn excess returns for our clients: security selection and sector weighting. This results in portfolios that exhibit slightly higher volatility than actively managed portfolios which maintain neutral sector weights. However, we believe that willingness to deviate from a benchmark is a prerequisite of generating meaningful excess returns over time.