Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

The Top 5 Contrarian Reads of the Week: Berkshire Hathaway Inc. (BRK.B), H.J. Heinz Company (HNZ)

Page 1 of 2

For all that is written on the topic, the key to beating the market can be boiled down to a single concept: variant perception. In order to earn a return that is different than the market average, you need to do different things, based on views that are different from the consensus. Here are some of the best contrarian articles I read this week.

Berkshire Hathaway Inc.How a correction could occur
Jeremy Grantham, the chief investment strategist of asset manager GMO, is one of the great contrarians who write freely on investing. If you’re not up for reading his most recent quarterly letter [free registration required] in its entirety, InvestmentNews does a nice job of “packaging” 10 views contained in the letter, including the following:

If GDP growth drops unexpectedly, corporations might easily be caught [budgeting incorrectly] or over-expanding [although this current ultra-cautious U.S. corporate system, which only reluctantly makes capital investments, is unlikely to be caught out too badly], and perhaps more importantly investors may be shocked by continuous revenue warnings, which might cause the market to sell-off.

Junk bonds
As mentioned here, it appears the view that junk bonds are overpriced is becoming the consensus among the “smart money.” The Financial Times’ John Dizard is a dissenting voice. In “There is a Rational Basis for Buying Junk” [free registration required], he writes:

The economies in the US and Europe, where you find corporate high yield bond issuers, are not in a frothy, excited, state. They’re in stagnation. The markets reflect this with low volatility. That signals slow social decline, but a lower probability of financial crashes. Historically, corporate credit spreads are linked not so much to equity market price levels as equity volatility levels.

Nevertheless, shareholders of the iShares iBoxx $High Yield Corporate Bond Fund ETF or the SPDR Barclays High Yield Bond ETF should take heed that these products, due to their size, cannot own the best opportunities in the sector. As Dizard notes:

While the large junk bond ETFs (exchange-traded funds) and junk mutual funds have gobbled up the relative large issues, they have much less demand for smaller junk bond issues. There are fewer of these than there were a few years ago, but lacking big buy tickets from large ETFs or institutions, they can often be underpriced relative to their real credit risk.

For more on the structural problems affecting junk-bond ETFs, read my Friday column.

Ketchup on the pundits’ faces?
Berkshire Hathaway Inc. (NYSE:BRK.B)
‘s announcement last week that it is taking H. J. Heinz Company (NYSE:HNZ) private, in partnership with Brazilian-backed investment firm 3G Capital in a deal valued at $28 billion, precipitated much chatter. Commentators were quick to remark that the deal reflects the growing confidence in executive boardrooms and augurs the start of a merger and acquisition boom. Alice Schroeder, Buffett’s official biographer, struck a more cautious tone in her commentary for the Financial Times [free registration required]:

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!