Will 2012 Be The Year of the Contrarian?

Brett Arends MarketWatch January 30, 2012

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Jan. 27, 2012, 12:01 a.m. EST

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By Brett Arends, MarketWatch

BOSTON (MarketWatch) "” The Mayans have Dec. 21 penciled in for the end of the world, but after the first few weeks of 2012, there's one question to ask on Wall Street.

Can the conventional wisdom last that long?

Already the new year is shaping up to be more interesting than most people realize.

So far this year, the contrarians have been on top and Wall Street's conventional wisdom has been knocked about badly.

/quotes/zigman/87598/quotes/nls/nflx NFLX 123.79, +7.78, +6.71% Netflix, year-to-date

This week Netflix /quotes/zigman/87598/quotes/nls/nflx NFLX +6.71% skyrocketed as quarterly results trounced expectations.

A few days earlier, retailer Sears Holdings /quotes/zigman/95136/quotes/nls/shld SHLD -0.63% boomed as chairman Eddie Lampert bought about $170 million in shares. There are rumors he may try to take the company private.

What did those two stocks have in common? Easy. At the start of the year, Wall Street hated them both.

Both Netflix and Sears Holdings were on the list I published a few weeks ago, of the 10 stocks Wall Street analysts hated the most coming into 2012. Read "Should you buy Wall Street's top stocks for 2012?"

/quotes/zigman/95136/quotes/nls/shld SHLD 44.06, -0.28, -0.63% Sears Holdings, year-to-date var storychart587473543Data = [{"Key":"SHLD","Value":{"BarFactor":86400000,"BarSize":1,"CustomDateRange":false,"Data":[{"Key":"SHLD","Value":{"BlueGrassChannel":"\/quotes\/nls\/shld","IsIndex":0,"Name":"Sears Holdings Corp.","Sessions":[{"High":{"Index":22,"Price":54.76},"Low":{"Index":4,"Price":28.891},"News":null,"PreviousClose":null,"Regions":[{"Start":0,"Stop":0,"Type":3}],"Start":"\/Date(1325397600000-0600)\/","Stop":"\/Date(1327903200000-0600)\/","Trades":[null,null,31.43,30.8,30.12,29.1404,null,null,29.69,30.46,32.9,34,33.56,null,null,null,36.75,39.49,43.35,49,null,null,47.39,45.78,44.87,44.34,44.06],"Weight":10}]}}],"Error":null,"xAxisLabelInfo":{"chartUnit":2,"displayUnit":3},"xAxisLabelsObj":{"ElementList":[{"element":"12","x":140}],"timeLines":[]}}}]; var storychart587473543Chart = new EmbeddedChart('#storychart587473543', NormalChartStyle, 280, 187, 'ytd', '1dy', null, null, storychart587473543Data, 'SHLD', ''); storychart587473543Chart.ShowChart(); storychart587473543Data = null; jQuery.data($('#storychart587473543').get(0), 'embeddedchart', storychart587473543Chart);

So far this year Netflix is up 68%, Sears 38%. (Oh, and Netflix started 2011 as one of the stocks analysts loved the most, and promptly collapsed).

Overall, Wall Street's "10 most hated stocks," as compiled with the help of Reuters, is up 14% since Dec. 31.

That's twice the return from the 10 stocks analysts actually liked the most. Google /quotes/zigman/93888/quotes/nls/goog GOOG +2.09% , which made analysts swoon, is already down 11%.

And the 14% return is nearly three times the 5% gain you would have made just from owning the Standard & Poor's 500 index /quotes/zigman/3870025 SPX -0.16% .

Click to Play $(function () { $("#video_EC552535-C3EF-4AA8-9204-57E64BFB0AC8").click(function (e) { e.preventDefault(); MarketWatch.Video.loadAndStartVideo('EC552535-C3EF-4AA8-9204-57E64BFB0AC8', 'video_EC552535-C3EF-4AA8-9204-57E64BFB0AC8', '287', '162'); }); }); Netflix recovers subscribers

After a summer price hike, Netflix added 610,000 U.S. subscribers as it worked to regain footing with customers, Ian Sherr reports on digits. Photo: Getty Images.

Who wanted Bank of America /quotes/zigman/190927/quotes/nls/bac BAC -0.14% stock coming into 2012? Nobody. People on Wall Street wouldn't been seen dead owning this stock.

So far it's up 32%. No kidding. Citigroup /quotes/zigman/5065548/quotes/nls/c C +1.61% , another leper on the Street of Shame, is up 16%.

The only bank it was respectable to own was Wells Fargo /quotes/zigman/239557/quotes/nls/wfc WFC +1.89% . It's up a much more modest 7%.

Strange times? OK, maybe not. The 10 most hated stocks frequently beat the 10 most loved.

But you probably wouldn't normally expect such a big gap so soon.

Conventional wisdom is there to be overturned. When everyone is betting one way, the shrewd move is often to look for opportunities to go the other way.

Everyone still hates the euro, European equities, and Japanese equities. They love U.S. stocks. They hate bonds, and like equities. Hardly any investors own any gold. Make of it what you will.

/quotes/zigman/87598/quotes/nls/nflx Add NFLX to portfolio NFLX Netflix Inc. $ 123.79 +7.78 +6.71% Volume: 14.60M Jan. 27, 2012 4:00p var embeddedchart1126162258Chart = new EmbeddedChart('#embeddedchart1126162258', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:NFLX'); jQuery.data($('#embeddedchart1126162258').get(0), 'embeddedchart', embeddedchart1126162258Chart); /quotes/zigman/95136/quotes/nls/shld Add SHLD to portfolio SHLD Sears Holdings Corp. $ 44.06 -0.28 -0.63% Volume: 1.29M Jan. 27, 2012 4:00p var embeddedchart2019932601Chart = new EmbeddedChart('#embeddedchart2019932601', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:SHLD'); jQuery.data($('#embeddedchart2019932601').get(0), 'embeddedchart', embeddedchart2019932601Chart); /quotes/zigman/93888/quotes/nls/goog Add GOOG to portfolio GOOG Google Inc. Cl A $ 579.98 +11.88 +2.09% Volume: 3.62M Jan. 27, 2012 4:00p var embeddedchart70767762Chart = new EmbeddedChart('#embeddedchart70767762', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:GOOG'); jQuery.data($('#embeddedchart70767762').get(0), 'embeddedchart', embeddedchart70767762Chart); /quotes/zigman/3870025 Add SPX to portfolio SPX S&P 500 Index 1,316.33 -2.10 -0.16% Volume: 676.62M Jan. 27, 2012 4:32p var embeddedchart124732823Chart = new EmbeddedChart('#embeddedchart124732823', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:SPX'); jQuery.data($('#embeddedchart124732823').get(0), 'embeddedchart', embeddedchart124732823Chart); /quotes/zigman/190927/quotes/nls/bac Add BAC to portfolio BAC Bank of America Corp. $ 7.29 -0.01 -0.14% Volume: 230.91M Jan. 27, 2012 4:00p var embeddedchart728891016Chart = new EmbeddedChart('#embeddedchart728891016', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:BAC'); jQuery.data($('#embeddedchart728891016').get(0), 'embeddedchart', embeddedchart728891016Chart); /quotes/zigman/5065548/quotes/nls/c Add C to portfolio C Citigroup Inc. $ 30.87 +0.49 +1.61% Volume: 37.72M Jan. 27, 2012 4:02p var embeddedchart372029407Chart = new EmbeddedChart('#embeddedchart372029407', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:C'); jQuery.data($('#embeddedchart372029407').get(0), 'embeddedchart', embeddedchart372029407Chart); /quotes/zigman/239557/quotes/nls/wfc Add WFC to portfolio WFC Wells Fargo & Co. $ 29.60 +0.55 +1.89% Volume: 31.19M Jan. 27, 2012 4:01p var embeddedchart1999992832Chart = new EmbeddedChart('#embeddedchart1999992832', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:WFC'); jQuery.data($('#embeddedchart1999992832').get(0), 'embeddedchart', embeddedchart1999992832Chart); //$(document).ready(function() { var storywidth = $('#mainstory').width(); var maxwidth = storywidth; $('#maincontent pre').each(function (index, value) { var thiswidth = $(value).width(); if (thiswidth > maxwidth) maxwidth = thiswidth; }); var offset = maxwidth - storywidth; if (offset > 0) { var margin = 13; var blanketwidth = $('#blanket').width(); var contentwidth = $('#maincontent').width(); $('#blanket').width(blanketwidth + offset + margin); $('#maincontent').width(contentwidth + offset + margin); $('#mainstory').width(storywidth + offset + margin); } //});

Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for the Wall Street Journal.

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Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S... Expand

Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He was educated at Cambridge and Oxford Universities, and has worked as an analyst at McKinsey & Co. He is a Chartered Financial Consultant (ChFC) and Accredited Asset Management Specialist (AAMS). His latest book, "Storm Proof Your Money," has just been published by John Wiley & Co. Collapse

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