At equities.com, we’ve always been focused on building an active community among the leading voices within the world of finance. However, as with many other fields, in recent years, we’ve noticed a significant shift away from traditional sources of news, tips and predictions and toward the growing number of financial bloggers.
In this series, we profile some of the most distinct and noteworthy voices in the world of financial blogging. Here you’ll find our recent interview with Vitaliy Katsenelson at Contrarian Edge. Vitaliy is a Russian immigrant to the U.S. and a Chief Investment Officer at Investment Management Associates, Inc. He has been profiled by Barron’s, and he has written for a host of publications, including Financial Times, Businessweek and the New York Post. Read below to learn what led Vitaliy to get into financial blogging, the challenges of taking a contrarian position, and sneaking his love of classical music into a blog about finance.
EQ: What inspired you to start Contrarian Edge?
Katsenelson: I used to teach an investing class at University of Colorado. This goes back about 10 years. At the time, I was writing an article for the Financial Times. At the Financial Times, articles are behind a paywall, so that allowed me to repost my articles on the Internet for my students to read. In fact, 90% of my articles are probably written for some kind of a non-blog publication, or for my students. From there, I’ll also post them on my blog.
EQ: You cover a lot of topics, some are based on observations of the market and some are more personal. Do you have any philosophy going into blogging or when trying to decide what kind of topic is worth covering on your blog?
Katsenelson: There are two types of writers: Those who can write about anything, and those like me, who can only write about subjects that they really care about. It’s such a difficult process for me that I really have to care about the topic.
When I started writing, I was very serious. All my words were proper. They were big words. I was very self-conscious that I wanted people to take me seriously. Until one day, when I wrote this article describing my horrible experience with TiVo.
When I called TiVo technical support, they had this automated system that could not understand my accent. I had to ask my three year old son to repeat everything that I said on the phone. Fortunately, the system understood my son. I had a Russian accent and my son had a Disney accent.
There was very little market insight in that article, but it was funny, and I got such a great response from readers. I realized people don’t want to just read another boring article. Writing that article kind of changed my life, because my writing has changed. Nowadays, whatever interests me, that's what I’ll write about.
You see parts of this on the website for my blog. There is a section titled “P.S. Life" and one titled “P.P.S. Music". I like classical music, and I love that when I write, I'm forced to learn more about it.
EQ: Do you feel the need to connect financial matters to, say, classical music, or anecdotes from your life, or do you feel those articles can stand on their own?
Katsenelson: Sometimes those connect, but I never force them to. If you look at my latest post, this weekend I was watching a TED Conference and there was this talk about conductors. The presenter talked about how a conductor is really the manager of an orchestra. You have a lot of very accomplished people in the orchestra. Otherwise, they wouldn’t be there. They are very talented, but the conductor's job is to make them all sound good together. If you think about it, you can relate this to management, and different management styles.
EQ: Do you have any sort of long term goal for the blog?
Katsenelson: Not at all. I’ve always just been inspired to share my thoughts on the markets, as well as my other personal interests with my readers. I never had an advertisement on the blog. I never tried to monetize it. That’s never been important for me.
EQ: Do you have any stocks or investments that you find particularly interesting?
Katsenelson: I wrote a huge article about Tesco Corp. (TESO) . It’s probably one of the more contrarian position that I’ve taken, because that stock has been completely decimated. If you read the media, you’ll probably want to hide under the table if you own the stocks. But, when we do analysis, we can’t kill the company, no matter what we try.
The stock is making a multiyear low, but they have businesses in Southeast Asia that they can sell. They have a bank that they can sell. They have a business called Dunnhumby which is a loyalty card business that they can sell. They have a business in Eastern Europe that they can sell. If they just monetize those businesses and they sell at okay prices – not great prices, not bad prices -- okay prices. You get a U.K. business almost for free. It’s still the largest retailer in the U.K. They have almost 30% market share and they have almost 50% market share in the line grocery business.
They are facing strong competition from discounters, but here in the U.S. you can see the analogy with what's happened in grocery stores like Wal-Mart Stores Inc. (WMT) . Grocery stores, I would argue, were in worse shape than Tesco is today, but they were able to overcome that and now they're making new highs. It took a while, but they're a much more pleasant place to shop. If their consumers benefit and their stockholders benefit, it forces the management to do more with less. I think the same thing is going to happen with Tesco. It’s one of those controversial investments because if you read the U.K. press you feel like this thing is going out of business.
EQ: That certainly is a contrarian position, but you justify it well.
Katsenelson: I don’t try to be contrarian for the sake of being contrarian. I try to come to my own conclusions. If my conclusions agree with the consensus then that’s fine, but when your conclusion is different from the consensus, then by definition it becomes contrarian and then at that time this is one that I want to write about because this is a great talking point.
When making a prediction, you always want to sound confident, but I’d be lying if I said I didn’t feel a certain amount of trepidation at times. We are not genetically designed to be contrarians. It takes a long time to feel comfortable when you're on the lonely side of the trade, even when your research tells you that you're right. That’s what makes this so difficult.
EQ: Do you have any specific advice that you might want to impart to your readers?
Katsenelson: Life is too short. People have to read wisely I guess. That's a nugget of wisdom.
EQ: Finally, in the time that you have been blogging about finance and blogging in general have you noticed that the financial blogging landscape has changed at all?
Katsenelson: I think social media changed things a lot. To be honest for me social media was kind of an afterthought. I don’t care how many people come to my website for the most part. That’s why I probably didn’t care as much about it. A lot of bloggers are very consistent when they post their content, but I’ve never been able to do that. I guess I’m not a traditional blogger.
For further analysis of the markets and much more, follow Vitaliy Katsenelson's blog Contarian Edge.
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