Buy What You Hate (WTF?)

I did an extensive interview with Wall Forbes of Forbes magazine. You can see the whole thing at, but here is a brief excerpt:

Forbes: So what kinds of things are you recommending at this point?

Ritholtz: I’m going to give you three groups of investments, one of which makes sense, and the other two are really counterintuitive. Or maybe it’s not counter-intuitive, it depends on how you think of it.

The first group is what I call our bailout bet. And that’s all the companies that I think are horrible companies and I hate their managements. They’re terrible corporations, and we should throw them into the ocean. But we had to hold our nose and buy them, because they were going higher. And that’s Citigroup, Bank of America, and Fannie Mae.

Forbes: Interesting.

Ritholtz: Three giant disasters. This is what I would call a trade, not a put-it-away-for-the-future. They’ve all moved significantly higher. Citigroup, over the past few months, has gone from $3 to $4, which in terms of percentage basis, it’s a big move up. Fannie Mae has an absurd amount of momentum behind it. I think people are saying, “Well, the government now can’t let them go belly-up because they’ve thrown so much money at them.”

And Bank of America seems to be trading fairly well. I don’t like any of their management teams; I don’t like any of these companies. You know, this is the sort of thing that would make a Warren Buffet or Peter Lynch type of investor nauseous.

It’s like, wait a minute, you hate the company, you don’t like the management, and we bought it despite that. So that’s one group. A little counterintuitive, but you know the rationale is, everybody hates them. And yet they’ve gone up. It’s telling you to take a look at Citigroup, and look who’s been buying Citigroup. We see a lot of institutional big pension funds buying them. A lot of big institutions, things like state pension funds.

This is a reversal of what I said a year ago January. I hated these names then, I hate them now, but obviously many other factors and circumstances have changed.

There you have it, my new trading approach: Buy What You Hate.


UPDATE: April  9 2010 8:54pm

I am obviously being very tongue-in-cheek (although some people are missing the nuance)

The idea of buying a hated stock is put into better context here.


Worst-To-First Market Heroes
Wallace Forbes
Forbes, 04.08.10

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