WE’RE INVESTING IN UGLY DUCKLINGS...............
At the Scottish, we take a contrarian approach to global
stock markets.
We are high-conviction investors and focus on stocks
that are out of favour with mainstream investors, as
we believe these offer the greatest potential for long-
term gains. This is because popular stocks tend to
be overvalued – while out-of-favour stocks are often
too cheap. We aim to exploit this inefficiency for our
shareholders.
The investment environment is inherently cyclical.
We see cycles in industry fundamentals, corporate
behaviour, analyst views and investor sentiment.
These cycles are closely linked: when an industry’s
fundamentals have been strong for some time,
management teams, analysts and investors tend to
be overly optimistic about its future. This leads to
irrational investment decisions. Some of our best
opportunities arise at the opposite point in the cycle –
when a downturn leads to excessive pessimism about a
company’s prospects. When this happens, we can buy
stocks precisely when the profit opportunity is greatest.
‘WHEN UGLY DUCKLINGS BECOME FULLY FLEDGED
SWANS, WE’RE LOOKING TO SELL. UNTIL THEN, WE
KEEP PORTFOLIO TURNOVER TO A MINIMUM’
DIY Investor Magazine
/ March 2017
32
