When it comes to recommending stocks for our Members to buy, Fat Prophets are predominantly ‘value’ investors. But what does being a value investor mean?

In the stock market, the price of a stock does not always reflect the value of a company. Indeed, a company’s real, or intrinsic value is based on many inputs that are subjective by nature. Wide deviations from estimates of intrinsic value often occur due to poor investor sentiment, driven usually by concerns that are short term in nature. Whatever the reason, there are always companies that are “on sale” and we scour the market for these exact opportunities.

We focus on investing in a company , not stock prices. This approach allows us to be more rational investors in times of volatility. When appropriate, we also like to focus on smaller companies. Such companies are generally over-looked and under-researched, allowing us to find compelling opportunities.

As contrarian investors, we look for opportunities in the unloved and unattended corners of the market. Where others see doom and gloom, we see opportunity. Conversely, when others are euphoric, we become conservative. However we are not contrarian for the sake of it. We like to pick trends early and ride the trend for the duration. At some point ‘the crowd’ will join in. While that may be an early warning sign, often the biggest returns at made at the end of the bull run.

In our most famous call to date, we have been recommending gold stocks since the gold price was US$262 per ounce. While the investing community is catching on, we are still confident the gold price will rise into the thousands before the bull run is over.

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