Different Drummer Investing or The March of the Contrarians
"I am a lone, lorn creetur ... and everythink goes contrairy with me." Charles Dickens, David Copperfield
So might any investor say when following the fundamentals, considering the greater appeal of technical analysis. In the market, as anywhere else, it takes self-confidence and a belief in the right method to break with the crowd, to think for yourself, and to ignore the mentality of the herd.
You need to remind yourself—constantly—about some market realities:
•   The crowd usually is wrong.
•   Professional analysts and managers are usually wrong.
•   By the time everyone agrees on something, its time has passed.
These are, indeed, contrary points of view. To believe in the minority is intimidating, because it requires independent thought, belief, and faith. It is always easier to go along with the majority point of view, where one is not required to support a belief system. There is comfort in conformity.
Contrarians believe that comfort comes at the price of being wrong. Because the majority is more often wrong than right about market direction, timing, and trends, the majority of investors can easily fall into the trap of being wrong. It is the easy way. To develop a plan and have faith in it, as well as the confidence to be guided by what makes sense, is the way to succeed in the market, but it is not the easy way nor the popular way.
The Contrarian as Fundamentalist
Is being a contrarian the same as being a fundamentalist? Not necessarily. When you consider the investment strategy of the market in general, you find that technical analysis is far more popular. The Dow Jones Industrial Average, the major indicator and for many the market itself, has nothing to do with fundamentals. Chart watching and attention to other nonfinancial indexes makes the majority of individual investors technicians. So in the sense of comparisons to the market, you will be contrarian if you trust fundamentals as a primary means of information.
The contrarian theory is not the same as a comparison between technical and fundamental schools of thought, however. As a broad definition, contrarians believe that it is the nature of group thinking to miss the point and to guess wrong. A contrarian has observed that real market opportunities occur by not agreeing with the current trend. Specifically, if there is a sudden drop in prices accompanied by a panic, the contrarian remains cool and looks for buying opportunities. On the other side, when a sudden run-up in the market or a specific stock causes a buying stampede, the contrarian recognizes the vulnerability of the situation and quietly sells at a profit or sits back and waits for things to settle down.
This is fundamentalist thinking in that it is long-term rather than short-term. The day-to-day trading strategies are seen as passing matters of relatively little importance over time. The fundamentalist uses current information only to look for signals that a hold should be changed to a sell position, rather than to buy and/or sell actively.
As a fundamentalist, you also recognize the nature of crowd thinking. Crowds often are wrong and, whether right or wrong, they think not with their individual minds but with a mindless and illogical method that cannot be given responsibility, only blind authority. The market as a whole acts at times like entire communities caught up in a particular idea. A study of human nature in history reveals this tendency. Historian Charles Mackay observed this by stating:
We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.
Mackay aptly describes the stock market mindset and the nature of investing in general. At various times, sudden hysteria in the stock market, real estate, gold, and other investments has seized populations and inspired reckless actions, often to the point that people's lives have been ruined. Remember that by its nature, a mass of people cannot be expected to think logically and clearly, especially when under pressure because situations have changed suddenly.
KEY POINT
There is great danger in going along with the majority. History shows that group thinking often is wrong, sometimes drastically wrong.

The fundamentalist is coldly scientific and—while perhaps having less fun or excitement than the technician—tends to think of the market and the cause and effect of investment value in a scientific manner. This is a contrary point of view to the usual way of thinking about the market. You are unlikely to find a more suspicious group of people than stockbrokers and traders. The contrary approach of fundamental analysis is best seen in the comparison between actions and perceptions. Most technicians, when asked, will swear by the fundamentals. They will agree that the answers are all in the financial numbers and that, when all is said and done, the numbers are the whole story. However, they will then look to the patterns of charts and spend many hours speculating about the direction of the DJIA in the next six months. Thus, even the dedicated technician will say that he or she believes in the fundamentals, but would rather spend time trying to forecast the indexes than study a financial statement.
The scientific mind of the fundamental analyst is what makes the difference. It is the belief in the fundamentals accompanied by the practice of decision making based on the same information that defines the real fundamentalist. In this sense, it is contrary to stay on course and to not be led astray into speculation about the Dow—that is, you refuse to make decisions on the basis of pure guesswork. This is the flaw in most market thinking. It is very easy for anyone, including professionals, to profess belief in the fundamentals but to end up acting on nonfunda-mental information.
Is this a problem only for individual investors? Not at all. Professional managers and analysts are perhaps more susceptible to distracted thinking and crowd mentality than individuals, because they exist in the market environment; that is their job. You should listen closely to stockbrokers, financial planners, and analysts. They might have many good ideas based on fundamentals, but what is the decision-making criterion? Does the professional suggest taking actions now based on movement in the Dow? Do they depend on chart patterns to time buy and sell decisions? Do they ultimately abandon the fundamentals after the analysis, and make their decisions or recommendations for other reasons?
If you make use of professional services—stockbrokers or financial planners, for example—pay close attention to their sources for recommendations. Be wary when advice is given to you solely on the basis of technical indicators. As easy as it is to use such highly available and visual indicators as the DJIA, these indicators are not reliable for the purpose of making long-term decisions in your portfolio. Perhaps the greatest problem in asking for advice from others is that you cannot always identify why they recommend a particular course, what purpose is being served, or what types of information have been replied on to arrive at the conclusion.
Just as you need to always remember the nature of crowds and their tendency to be wrong, it does not mean that the general attitude is always wrong. You can take contrary thinking too far by completely rejecting all market wisdom and acting contrary to all information you receive. This would not be logical. The contrarian does not reject all information, but tends to be highly selective and to think like an individual rather than as part of the larger market.

KEY POINT
Listen carefully when others give you market advice. What is the source of their reasoning?