Buy the most hated stocks

Opinion: Easy way to get rich: Buy the most hated stocks

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Quote:

Go back seven years, to the start of 2008. Imagine at that time you had invested $100,000 in an S&P 500 index fund, reinvesting all dividends, using a tax-sheltered account. Today you’d have about $170,000. Not bad. If, instead, you had invested that money at the start of each year in the 10 stocks that analysts rated most highly, cashing out on Dec. 31 and then buying the top 10 most loved stocks for the following year, today, seven years later, you’d be slightly better off — you’d have nearly $180,000, according to my analysis using FactSet data. But now imagine you had done the exact opposite, and each year had invested your money in the 10 stocks that analysts rated the worst. How would you have done? Hmmm. Today you’d have $270,000. No, really. You’d have earned more than twice as much as investing in a simple index fund.

There's probably some truth to this in that the market overreacts to analyst's negative ratings. You buy the stock and throughout the year the overreaction wears off.



I'd be interested to see this done over different time periods (I'm guessing it only works over the last 7 years because of arbitrary cut offs) and I'd be curious to also see this type of analysis by various sites that provide ratings.

Buy the most hated stocks