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02/12/20202 mins

Ugly ducklings… in the unlikeliest of places!

At The Scottish, we take a contrarian approach to global stockmarkets.

That’s because golden opportunities – ugly ducklings, as we think of them – can be found in unlikely places. By ignoring the latest investment trends and scrutinising unloved stocks, we can spot the potential for reappraisal that others miss.

Our philosophy is simple. We recognise that popular stocks become overvalued while unfashionable stocks are often too cheap. And we aim to exploit this inefficiency to deliver long-term gains for our investors.

Exploiting irrational markets

By the time everyone realises that a great company is great, it may no longer be the best investment. It becomes difficult to see the storm on the horizon when everyone is toasting past success. Similarly, when a company has hit rock bottom, it can be hard to see that there will ever be good times again.

Market inefficiency is driven by human nature – people feel comfortable sticking with the crowd. But the herding instinct that ensured human survival in the past may not serve our best interests in financial markets. We believe it pays to ignore these instincts when it comes to making investment decisions.

By looking for positive signs of change in the out-of-favour areas of the market, and avoiding the unsustainable bubbles, we see a better balance of risk and reward.

Stand apart from the crowd

Our investment approach is differentiated in a world awash with index trackers. We don’t want to own the overpriced areas of the market, so we construct the investment portfolio without the constraints of a benchmark. This means we expect our performance to be differentiated too.

Built for uncertain times

When the market mood turns, we believe it is important to have a keen eye on risk and reward. That’s particularly pertinent when markets have soared through new highs lately.

The fortitude of our convictions

When we see that positive change is afoot, we have the conviction to back our ideas. But we know it can take time for the changes we see to be recognised by investment markets. That’s why we take a long-term view. By being patient, we can wait for our investment cases to come to fruition – for ugly ducklings to turn into beautiful swans.

Being paid for our patience

Although the ugly ducklings we choose are unloved, we believe that they have the strength and flexibility to adapt and thrive over the longer term. While we never consider a high yield an attraction in its own right, a substantial dividend from such companies is appealing to us as it offers a return while we wait for our thesis to unfold.

If you like our thinking and want to hear more from us, check #Contrarian2021 on Twitter and LinkedIn. We’ll be sharing our contrarian thoughts and informed commentary from our manager, to help you unearth the recovery opportunities in the upcoming year.

Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations. You may not get back the amount you invest.

Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this promotion should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.

Subscribe to our newsletter

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We respect your privacy and do not sell, rent or loan any information collected on this site and your data will not be used in ways to which you have not consented.

You can unsubscribe at any time by clicking on the unsubscribe link on any email we send you.