Contrarian investing is much easier in theory than practice. Spotting an oversold sector that can recover is only half the battle; getting the timing right separates great investors from the rest. Buying too early exposes portfolios to horrific losses.
Mining services is an example. The sector was on life support at the start of 2016 as investors feared further earnings downgrades and bankruptcies. Those who bought when everybody else rushed for the exits deserve every dollar of profit from the mining-services recovery.
A similar story is unfolding in retail. Persistent consumer gloom and fears about new competition from Amazon in Australia have smashed the sector. One retailer after another has downgraded earnings and many retail stocks have lost more than 40% in a year.