Being contrarian is a necessary condition to successful investing. However, successful investing not only requires holding a contrarian, i.e. different, view about the prospects for a security, but it also requires that view to be right. When it comes to deep value investing, it’s often easy to find investors who have contrarian views. It’s also often that these investors are wrong in their views, leading to so-called value traps. When it comes to wide-moat investing, on the other hand, it’s rare to find investors who have contrarian views. Everybody seems to agree on the quality of the business or management, which tends to already be reflected in the price of the security. As a result, wide-moat investors, too, often tend to underperform despite the fact that they were broadly right in their assessment of the business and management.
This appreciation for the need to be contrarian when it comes to successful investing in wide-moat businesses is rare to find. Enter Rupal Bhansali, chief investment officer for international equities at Ariel Investments. I had the pleasure of recently catching up with Rupal in New York. In the wide-ranging conversation, Rupal discussed her contrarian approach to finding undervalued, quality franchises in global equity markets. We touched on topics ranging from how a contrarian mindset is reflected in idea generation to why quality franchise businesses become mispriced, and what risk management means in the context of contrarian investing.
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