He Buys What Everyone Else Is Selling

The manager of a little-known fund has compiled a terrific record by staying true to his contrarian instincts.

In describing America more than 170 years ago, Alexis de Tocqueville may have unwittingly anticipated the nature of modern financial markets when he wrote that he knew of no other country in which there was "so little independence of mind." Nowadays, once people become fixated on the desirability of a particular investment, they pile on, often mindlessly, boosting its price and creating a self-fulfilling prophecy. The cycle eventually ends, and many investors, particularly those who have arrived at the party late, take a licking.

Fighting the tyranny of the majority is a dangerous game. Robert Kleinschmidt, who runs the aptly named Tocqueville fund, knows just how dangerous because he approaches stock picking from a diametrically opposed perspective. If the crowd loves a stock, he stays away; only when a stock is reviled does he get interested. And even if his analysis that the crowd is wrong is right, Kleinschmidt may have to wait a long time before the majority accepts his position.

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Manuel Schiffres
Executive Editor, Kiplinger's Personal Finance