David Dreman Quotes
102 David Dreman Quotes
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Psychology is the necessary link required to activate the contrarian strategies…
David Dreman
Many of the things most of us accept as gospel, such as how to measure risk precisely, the need to diversify into foreign stocks, or that small stocks will provide us with better returns, simply are not true.
David Dreman
Napoleon was the greatest probability player of modern warfare. Most often outnumbered, he won by moving fast and concentrating his forces on the battlefield on the enemy’s weak points.
David Dreman
The market does not run on chance or luck. Like the battlefield, it runs on probabilities and odds.
David Dreman
Getting in near the bottom and out near the top is not as easy as market timers or asset allocators would have you believe.
David Dreman
Rapid turnover [of stocks] does not improve results, but seems to damage them slightly.
David Dreman
Well known on the street, is the fear of issuing sell recommendations. Sell recommendations are only a small fraction of the buys. A company that the analyst issues a sell recommendation on will often ban him or her from further contact.
David Dreman
People make confident predictions from incomplete and fallible data. There are excellent lessons here for the stock forecaster.
David Dreman
People are not good intuitive statisticians, particularly under difficult conditions.
David Dreman
Respect the difficulty of working with a mass of information. Few of us can use it successfully. In-depth information does not translate into in-depth profits.
David Dreman
Tread carefully with current investment methods. Our limitations in processing complex information correctly prevent their successful use by most of us.
David Dreman
Analysts’ forecasts are usually optimistic. Make the appropriate downward adjustment to your earnings estimate.
David Dreman
Most current security analysis requires a precision in analysts’ estimates that is impossible to provide. Avoid methods that demand this level of accuracy.
David Dreman
It is impossible, in a dynamic economy with constantly changing political, economic, industrial, and competitive conditions, to use the past the estimate the future.
David Dreman
Be realistic about the downside of an investment, recognizing our human tendency to be both overly optimistic and overly confident. Expect the worst to be much more severe than your initial projection.
David Dreman
Surprises as a group, improve the performance of out-of-favor stocks, while impairing the performance of favorites.
David Dreman
Positive surprises result in major appreciation for out-of-favor stocks, while having minimal impact on favorites.
David Dreman
Negative surprise result in major drops in the prices of favorites, while having virtually no impact on out-of-favor stocks.
David Dreman
The effect of an earnings surprise continues for an extended period of time.
David Dreman
Buy solid companies currently out of market favor, as measured by their low price-to-earnings, price-to-cash flow or price-to-book value ratios, or by their high yields.
David Dreman
Don’t speculate on highly priced concept stocks to make above-average returns. The blue chip stocks that widows and orphans traditionally choose are equally valuable for the more aggressive businessman or woman.
David Dreman
Avoid unnecessary trading. The costs can significantly lower your returns over time. Low price-to-value strategies provide well above market returns for years, and are an excellent means of eliminating excessive transaction costs.
David Dreman
Buy only contrarian stocks because of their superior performance characteristics.
David Dreman
My father was a very good commodities person, but he was actually a contrarian.
David Dreman
It’s very hard to go against the crowd. Even if you’ve done it most of your life, it still jolts you.
David Dreman
[In February 2012] Hundred of thousands of… investors bought gold, and in six months it rocketed from $1,400 to $1,900. Buying Treasuries because it was believed we were on the cusp of a major recession and buying gold because runaway inflation was expected in a highly overheated economy were diametrically opposite investor reactions to the same market events. It was like betting heavily on a horse to both win and come in trailing the pack in a major race. The investor, like the better in the analogy of the race, is almost destined to lose either way, because the house keeps a healthy percentage of both bets.
David Dreman
[In February 2012] So where do markets and the economy stand today? The truth is that nobody knows.
David Dreman
Not every single stock I’ve picked has come up a winner. I’ve had a few squirmy reminders that psychology affects me as much as the next guy. But… In the end, fortunately, I was one of the few who outperformed the market over an extensive period of time.
David Dreman
The dynamics of bubbles, and of the market reactions when they burst, have also stayed remarkably consistent over time. Unfortunately, we have not been good at learning from our mistakes.
David Dreman
There is only a 1 in 130 chance that the analysts’ consensus forecast will be within 5 percent for any four consecutive quarters… To put this in perspective, your odds are ten times great of being the big winner of the New York State Lottery than of pinpointing earnings five years ahead.
David Dreman
Volatility is not risk. Avoid investment advice based on volatility.
David Dreman
An all-encompassing strain of risk permanently entered the investment environment for the first time after World War II. The virulent new risk is called inflation. Nothing is safe from this virus, although its major victims are savings accounts, T-bills, bonds, and other types of fixed income investments…
David Dreman
The greater the complexity and uncertainty in the investment situation, the less emphasis you should place on your current appraisal and more you should look at the rate of success or failure of similar situations.
David Dreman
[On his yacht being called the ‘Contrarian’] Yes. Using a contrarian strategy has been good for us, so I thought it would be a good name… Basically, I buy stocks when they are really battered. [A sign on the road leading to David Dreman’s vacation home sums up his investment philosophy. The sign shows four ducks – three walking in one direction, the fourth going the opposite way. Dreman is the odd duck, the consummate contrarian.]
David Dreman
I always buy stocks with low price-earnings ratios, low price-to-book value ratios, low price-to-cash-flow ratios and higher-than-average yield.
David Dreman
[In June 2001 on what people were saying in 1999] We had a terrible year in 1999. My mutual fund was down 13% that year [the S&P rose 21%], and people were saying, ‘Value doesn’t work anymore. It’s different this time.’ But it never is!
David Dreman
[On the 2001 dotcom boom/crash] I knew this bubble would eventually burst. It was the largest bubble in stock-market history. What surprised a lot of people was how long it lasted.
David Dreman
[On the craziness of the dotcom bubble] You had a stock like VA Linux shoot up 800% in one day. Psychology is very important in investing, and people get mesmerized by moves like that.
David Dreman
Psychology is probably the most important factor in the market – and the one that is least understood.
David Dreman
People like exciting stories; they don’t like boring companies. That is the normal cause of investor overreaction.
David Dreman
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