David Dreman - Investment Guru by gauravjindal

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									Presented by: Group 5
       DAVID DREMAN: Biography
   Born: Winnipeg, Canada in 1936; son of commodities trader

   Affiliations:
     Rauscher Pierce Refsnes Securities Corp.
     J&W Seligman
     Value Line Investment Service
     The Journal of Psychology and Financial Markets
     International Foundation for Research in Experimental
      Economics (IFREE)
     Dreman Value Management, L.L.C 1997

   Publications
    "Contrarian Investment Strategy: The Psychology of Stock Market
    "The New Contrarian Investment Strategy" (1982)
    "Contrarian Investment Strategies: The Next Generation” (1998)
    David Dreman: Dean of Contrarian
Who is a contrarian investor?
   A person who takes an opposing view
   One who rejects the majority opinion, as in economic

Contrarian Philosophy:
   When others Are Selling: Contrarians BUY!
   When others Are Buying: Contrarians SELL!
How Dreman came to be a Contrarian
   1969: invested in popular stocks
   Followed the herd
   Lost 75 % of his net worth
   Shares of companies with negligible earnings skyrocketed
   Changed his investing philosophy:
    Buy stocks when they are battered
    Buy stocks with low P/E ratio, low P/BV ratio and have a higher
     than average yield

DAVID DREMAN: “The time to buy is when there's
 blood on the streets.”
    Investment Style: Contrarianism
   Proven, systematic and safe way to beat the market
   Investors consistently overvalue the so-called "best"
    stocks and undervalue the so-called "worst" stocks
   Contrarianism techniques developed by Dreman in the
   Stock-picking strategy: need not pick only cheap stocks
   Stock selling strategy: sell stocks when they move over
    the market multiple
              Stock Sale Strategy
   When a share reaches the average market multiple, an
    investor would start to sell it over a period of six to
    eight months

   If the company doesn't outperform within two-and-a-
    half to three years, the investor may lose patience and
    get out, even if the company still looks attractive

   If there's significant bad news, over and above the
    'normal' miss on quarterly earnings
Thumb rules for Prudent Investing
   No Technical Analysis

   No dependency on experts

   Investment on out-of-favour stocks

   Broad diversification of portfolio

   Not to be carried away by short-term record of an
    analyst or a money manager

   More time to work out for your strategy
      Late 2007: Dreman’s stock picks
   CIT Group: represents a good value at seven times
    the trailing earnings, with a dividend yielding 1.4%

   Frannie Mae(NYSE: FNM): seems to benefit from
    the subprime mortgage debacle

   Freddie Mac (NYSE: FRE ): has the industry's best
    mortgage acquisition standards, and a bucketful of
        Even experts make mistakes
   Dreman underestimated the extent of the credit crunch and its effect
    on the markets

   Saw buying opportunities in the beaten-up financial sector which
    proved to be a blunder

   Major holdings in Fannie Mae (NYSE:FNM), Freddie Mac
    (NYSE:FRE), Washington Mutual (NYSE:WM), Citigroup
    (NYSE:C), and Bank of America (NYSE:IKJ)

   DWS High Return Equity, lost 47% in one year, putting it in the
    bottom 3% of its peer group

   Most of the 49 stocks recommended by him were unable to escape
    recessionary damage
Why Dreman’s pet stocks plummeted
   26% decrease in net worth(after 1% transaction cost deducted)
    when stocks recommended by Dreman were all purchased

   Similarly timed investments in the S&P 500 would have lost
    investors 16%

   Dreman was heavily weighted on financials

   Unable to predict which stocks would get help from the
    federal govt. and which ones wouldn't

   Dreman’s pet stocks lost 55 % as against a 38.5% drop for the
    S&P 500 index
    David Dreman’s view on investing in
     the current recessionary market:
   Do not focus on short term results
   A diversified portfolio of large-cap value stocks will do well
    over time
   Favorite stock scrip's are Apache (oil and gas), Eaton
    (engineering), and Wells Fargo (Banking)
   Buy stocks and avoid corporate bonds, corporate debt and U.S
    Treasuries due to inflation concerns: Defensive stocks and
    treasury’s will prove to be laggards in the long run
Investments in current recessionary
         market : cont…
   Portfolio of stocks in some down-and-out industries
    with good potential:

    S&P Oil & Gas Exploration & Production ETF (29,XOP)

    Financial Select Sector SPDR Fund (9, XLF)

    SPDR KBW Bank ETF (14,KBE)
      Real estate: a good investment option
      Expects problems in the banking         sector   to   linger
Current Portfolio Standing

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