What makes a contrarian investment strategy
A contrarian investor thinks a lot like a value investor. Both seek to buy shares of stocks when they're trading below their intrinsic values. But contrarians, more so than value investors, are comfortable with companies' stocks trading below their intrinsic values for long periods of time due to unfavorable market sentiments.
A key component of contrarian investing is becoming fully invested in a sector or asset class as sentiment about that type of investment improves. Then, once most people are excited about the investment, contrarian investors recognize the growth of their holdings is soon likely to slow. Anticipating that their investments may begin to underperform the broader market, which could negatively impact investor sentiment and potentially lead to even greater price underperformance, contrarian investors sell their holdings to begin investing in currently unpopular industries.