It's hard to beat the market when investing in stocks. You can't tell from the paycheck, but even most professionals can't do it consistently. One of the challenges is that to beat the market you have to be more or less different. Suppose a stock is undervalued. A few people realize this and start investing, but soon the market notices too, and as more people join in, the price goes up and it quickly becomes overvalued and becomes a bad investment. Or, conversely, a stock could become unpopular and be sold off, causing its price to fall. There may be a reason why it's unpopular, but if you can overcome those bad expectations, it could be a great investment.
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This is contrarian investing at its simplest, going against the crowd. It takes faith, and things don't always go your way, but if you can't handle investing contrary to popular sentiment, it's probably best to adopt a passive investment strategy. Here are three contrarian stocks to consider now.
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1. VF Corporation (VFC)
Apparel maker VF Corp's share price has fallen almost 50% in the past 12 months as it has struggled with poor performance despite owning a portfolio of iconic brands including Vans, The North Face and Dickies. . However, the company is in the process of rebuilding itself, and while progress may be slow, those willing to take a chance and invest now could be well rewarded.
2. PayPal (PYPL)
The stock market seems to have all but given up on fintech company PayPal, which is now down about 80% from its all-time high in 2021, even though its results were in line with management's expectations. The company has been actively buying back its own stock, which could be a sign that management feels its stock is significantly undervalued. Investors who feel the market is overreacting have an opportunity to pick up this potentially bargain stock.
3. Occidental Petroleum (OXY)
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At a time when the impending climate crisis has many thinking the era of fossil fuels is over, oil companies may seem like a bad long-term investment. It's none other than Warren Buffett who is adding the company to his Berkshire Hathaway portfolio, and the broader stock market seems to agree. Predicting the future of fossil fuels is difficult, especially beyond the short term. However, OXY has invested heavily in carbon capture technology. The payoff for carbon capture is highly speculative, but if successful, OXY could be a big winner.
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This article originally appeared on GOBankingRates.com: Risky Business: 3 Best Contrarian Stocks If You're Looking for Big Profits
