It's not easy being a contrarian investor. If you don't have the stomach for volatility and the patience to sometimes wait years to see a profit, that's okay. For me, I get a thrill from it.
What Is Contrarian Investing?
The simplest explanation of what a contrarian investor does is buy investments when prices are down and general sentiment isn't currently favorable. Once it returns to favor, you sell for a profit. Then, rinse and repeat.
How Does That Look in Practice?
A great example of this is looking at the market as a whole during the height of COVID. Prices were cut in half pretty much across the board. The market felt like it was in freefall. What did I do? I saw a fire sale opportunity on blue-chip and mid-cap stocks that still had excellent fundamentals and paid dividends. I took a $10,000 loss by selling off a chunk of my small-cap stocks and then bought up as many dividend-paying blue-chip stocks as I could get. I set the dividends to reinvest into buying additional shares. In a year, my portfolio value doubled. The next year it doubled again. The whole time prices were low, I was reinvesting the dividends to buy more shares at a discount.
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Examining General Mills
I'm not going to get into a bunch of technical analysis on this company. They focus on "consumer staples" ranging from cereal to yogurt, to pizza dough and pet food. While inflation is affecting their sales, inflation os affecting how people approach food. More people are working to reduce their budget, and one easy way to do this is reduce how often you eat out. People need to eat, and General Mills products offer meals and snacks on a budget. They've had some issues lately, ranging from some plant closures as part of making their supply chain more competitive, to layoffs and lawsuits.
Their fundamentals appear to still be strong. They're working to better position themselves to remain competitive and profitable. They've paid dividends uninterrupted for 127 years, yet the price is currently trading at $44.62 per share because of some of the news. Its 52-week low was $42.78, so it has plenty of room for growth compared to its peak of $90.61 in 2023. (Source)
Nothing is guaranteed, but General Mills has a strong track record. Every investment carries risk, but it's one I'm willing to take considering the upside potential.
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