Dreman Contrarian Low-P/E Investing
TRADE-OFFBuy companies that the market values at depressed multiples, especially low P/E, while avoiding a fashionable consensus-growth approach. The approach is explicitly contrarian and emphasizes diversification.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 11.6% | 8.9% |
| Return per unit of risk (Sharpe) | 0.63 | 0.65 |
| Worst fall (max drawdown) | -66.1% | -52.6% |
// GROWTH OF $1, LOG SCALE
Tested on years it never saw (from the split): 12.5% a year against 12.4% for the benchmark; Sharpe 0.63 in the training years, 0.64 after.
After 25 bps of trading costs: 10.4% a year. WITHIN RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 1990s | 9.4% | 19.1% |
| 2000s | 11.5% | -2.6% |
| 2010s | 9.5% | 11.6% |
| 2020s | 17.2% | 14.1% |
// THE IDEA, AS PUBLISHED
David N. Dreman, 'Contrarian Investment Strategy' (1979) · 1979
- Buy from the low-P/E group of medium and large companies
- Require a sound balance sheet (low debt, adequate liquidity)
- Diversify across many stocks and industries; sell as the P/E nears the market's
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 19:41 ON THE QUANTGPT WAREHOUSE: EVERY DELISTED NAME KEPT, FUNDAMENTALS AS FILED. NOT INVESTMENT ADVICE.