Which is the next Infosys?
And we know it’s a flood. You want to get in fast…and your aim is to get out before the tide turns…or perhaps just after it turns. On the other hand is the investor who is, for lack of a better word, a contrarian.
He does not chase the money. Instead, he looks for bargains that the market is ignoring. If this reminds one of Buffett’s famous line: be fearful when others are greedy, and be greedy only when others are fearful.
As it happens, today, money is broadly chasing smallcap and midcap stocks and ignoring the large cap stocks (again, this is a broad generalisation). One simple indicator of this is money flows into mutual funds. Money is pouring into smallcap fund schemes and moving out of (dedicated) largecap mutual fund schemes.
Now, in this situation, you would expect momentum investors to do their thing – that is, chase smallcap stocks. Good for them! But what about the contrarian investor? It’s an obvious answer, but not an easy one to follow through on. If our contrarian investor were to go about picking stocks in the largecap universe (mainly) today, he would be termed a “lazy investor".
Why? Well, you end up buying well-known companies that are available for cheap today. That’s not exciting at all! To be honest, being a contrarian investor is never an easy thing to live up to. You always have to face up to the flag bearers of the momentarily hot investment theme.
Today it’s smallcaps. Tomorrow it will be something else. This brings us back to the question – which is the next Infosys? While I don’t know which is the “next Infosys" for you, what I can tell you is that this is perhaps a good time to be a contrarian investor or a lazy investor.
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