Diamond Hill: Anti-Herd Mentality

There are plenty of ways to invest. But it’s clear that investors following trends over the past few years have been whipsawed. That includes the market’s rallies and drops over the past few years. And the rise and fall of meme stocks.

Following the herd has only been profitable for those who got in early, and took profits quickly. Even if they didn’t get the exact top or bottom, knowing when to be in and out of a trend has been key.

The herd will continue to move into any asset that looks like it could offer strong returns. That won’t change. But investors who take an anti-herd mentality can buy when others are fearful. Done right, it can mean reaping a big profit.

There are still opportunities to buy beaten-down companies that trade at a discount to their value. And holding for years if necessary for the market to unlock that value.

For instance, while investors are chasing tech stocks once again, particularly AI ones, other sectors are beaten down.

That includes many real estate plays thanks to rising interest rates last year. Even a company with solid growth potential and cash flows, like Extra Space Storage (EXR), looks  undervalued here.

Declining interest rates this year could mean a rally for real estate-related companies. But add in a company that can improve its own prospects, and going against the herd can be a big winner.

To read the full analysis, click here.