Time and again, history shows that the groupings of stocks which outperform the market by the greatest percentage are deep value portfolios.
One of the reasons these portfolios no doubt provide the best returns is because they house the most unloved and widely discarded stocks. These are the stocks that almost nobody wants to buy, in other words, they're UGLY!
In contrast, most investors are a whole lot more comfortable buying what everyone else is buying, what's in vogue, popular and loved by many. High growth stocks with high valuations are an example of this. However, as Warren Buffett once penned with this approach:
You pay a very high price in the stock market for a cheery consensus.
In reality most investors don't feel comfortable buying really cheap stocks. This makes a deep value approach unappealing for most market participants and creates a great opportunity for investors who have the 'stomach' (the necessary investor psychology and behavioural traits) to buy undervalued stocks.
Here's a list of some ASX companies hardest hit in the past 12 months (as of last Friday's close) based on their total shareholder returns – share price depreciation plus dividends – that could possibly turn out to be the biggest winners for a portfolio in 2015…
- Origin Energy Ltd (ASX: ORG) down 13.6%
- BHP Billiton Limited (ASX: BHP) down 16.2%
- Coca-Cola Amatil Ltd (ASX: CCL) down 16.3%
- Orica Ltd (ASX: ORI) down 16.6%
- Crown Resorts Ltd (ASX: CWN) down 22%
- Flight Centre Travel Group Ltd (ASX: FLT) down 28.5%
- Iluka Resources Limited (ASX: ILU) down 30.9%
- Santos Ltd (ASX: STO) down 37.1%
- Fortescue Metals Group Limited (ASX: FMG) down 44.4%
