Time Value of Money
Kinds of Interest Rates
Future Value of an Uneven Cash flow
Security Market Line
Cost of Capital
The Balance Sheet
Hall of Fame
David Dreman was born in 1936 in Winnipeg, Canada. He studied at the University of Manitoba and graduated in 1958. He spent the following 20 years working in several different investment-related positions, including Director of Research at Rauscher Pierce, Senior Investment Officer at Seligman and Senior Editor at Value Line. In 1977, Dreman created his own investment firm called Dreman Value Management Inc. He served as the president and chairman of this firm.Dreman is well known for his contrarian investment style and he has authored numerous publications on this topic. Dreman has said that his introduction to contrarian investing came when he was working as a junior analyst in 1969. He said, "I invested in the stocks du jour and lost 75% of my net worth." This experience encouraged Dreman’s fascination with the influence of psychology on investment behavior and following this he adopted a contrarian strategy. The value that Dreman attributes to psychology is summarized in the following quote: "Psychology is probably the most important factor in the market – and one that is least understood."
He explained the strategy that he employs during a 2001 interview with Kiplinger's Personal Finance Magazine as follows: "I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time." He has also emphasized the value of investing in a time of market turbulence by saying, “I paraphrase Lord Rothschild: ‘the time to buy is when there's blood on the streets.'"
Dreman’s contrarian approach is also well summarized in the following quote: "One of the big problems with growth investing is that we can't estimate earnings very well. I really want to buy growth at value prices. I always look at trailing earnings when I judge stocks." He also encourages the merit of investing for the long term saying that "If you have good stocks and you really know them, you'll make money if you're patient over three years or more."
Dreman has also written articles for several financial journals, including the Financial Analysts' Journal, the Journal of Investing, and The Journal of Financial Behavior. He also writes “The Contrarian” column for Forbes magazine and has done so for 22 years.
About the author
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