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Citi’s quant team is casting a jaundiced eye on contrarian trades for the year ahead.
“We have learnt to be suspicious of attention-grabbing contrarian strategies,” strategist Robert Buckland wrote in a note. “They might make for good stockbroking, but they do not deliver good long-term investment track records.”
Contrarian calls underperformed in 2022, Buckland said.
“Bearish calls on IT worked, but their contribution was wiped out by bullish calls on China and Energy stocks,” he noted.
For 2023 in assets, contrarians will likely be “short both oil (USO) (BNO) and gold (GLD), and long EM (EEM) (VWO) and DM equities,” Buckland said. “They would be sellers of the US$ (DXY).”
In stocks, contrarians “are currently long Growth, bearish Value and prefer cyclical to defensive sectors. They will likely be bullish on US equities (SPY) (QQQ) (IWM), especially Tech stocks (XLK) (XLC), and bearish Energy (XLE). Within EM, they will likely buy anything China-related (MCHI).”
The bull contrarian stock picks for 2023:
- Meta (NASDAQ:META), year to date performance -65%
- PayPal (PYPL), -65%
- Tesla (TSLA), -62%
- AMD (AMD), -57%
- Netflix (NFLX), -51%
- Salesforce (CRM), -50%
- Intel (INTC), -50%
- Amazon (AMZN), -49%
- Micron (MU) -46%
- Edwards Lifesciences (EW), -43%
The bearish contrarian stock picks for 2023:
- Occidental Petroleum (NYSE:OXY), +99%
- Marathon Petroleum (MPC), +65%
- Exxon Mobil (XOM), +64%
- SLB (SLB), +54%
- ConocoPhillips (COP), +53%
- Valero (VLO), +52%
- McKesson (MCK), +48%
- Chevron (CVX), +41%
- Daiichi Sankyo (OTCPK:DSKYF), +35%
- Glencore (OTCPK:GLCNF), +29%
See 2022 in 22 numbers.
