David Dreman 101: The Genius Economist of Finance

David Dreman is a Canadian-American economist, investment advisor, and author who founded Dreman Value Management, a value investment management firm. He has also authored several books on investment, including “Contrarian Investment Strategies: The Next Generation” and “Psychology and the Stock Market: Investment Strategy Beyond Random Walk,” and written numerous articles for publications such as the Financial Journal, Journal of Investing, and The Journal of Financial Behaviour.

Who is David Dreman?

Dreman was born in Winnipeg, Manitoba, Canada in 1936, and graduated from the University of Manitoba in 1958. He worked as a research director at Rauscher Pierce and a senior investment officer at Seligman before becoming an editor at Value Line Investment Service in the late 1970s. In 1977, Dreman founded Dreman Value Management, which grew to a size of $22 billion within 10 years.

In the 2000s, Dreman’s firm was acquired by Kemper, which was later acquired by Scudder, which was in turn acquired by Deutsche Bank. In 2009, the firm followed its “contrarian value philosophy” and held onto depreciating banking stocks, but Deutsche Bank made changes to the fund’s management due to poor performance.

2008 Financial Crisis and Contrarian Value Philosophy

Dreman was also affected by the 2008 financial crisis, with the funds he managed experiencing a 35-45% drop in bank and other financial stocks. Dreman’s “contrarian value philosophy” involves selecting low-price-to-earnings ratio stocks that have fallen out of favour with the market, and his firm currently manages $5.5 billion in investment funds and accounts. It has provided an annual return of 10.8% through large-capitalization strategies since 1988.

David Dreman and His Invesment Strategy

Dreman’s investment strategy involves avoiding the use of technical analysis to select stocks and instead scanning for low-earning and low-cash-flow companies. He suggests going against the majority’s moves and focusing on under-the-radar companies instead of popular ones. At the beginning of his career, Dreman invested in trendy and large stocks, but he lost 75% of his money when the stock market declined.

In conclusion, David Dreman is a prominent figure in the world of finance, known for his “contrarian value philosophy” and his contributions to the literature on investment. While he has faced challenges in the past, his firm has continued to grow and provide solid returns for its clients, reflecting the effectiveness of his unique investment strategy.