But back to the theme of Crowd sentiment, and how to profit from it. One way of gauging where money is flowing in and out of the equity markets is the measure of sector strength. Sectors go in and out of favor regularly, though not necessarily logically. As I write this, the strongest sectors, in terms of stock performance versus the broad S&P 500 Index over the last quarter are Basic and Raw Materials, Energy, and Healthcare. The weakest are Financial Services and Utilities. These are the leaders and the laggards. In the middle are sectors like Technology, Industrials, and Consumer Staples.

But taking a closer look reveals a microcosm of the pitfalls of following a course that exclusively believes the past is future. Between mid-March and early April, the S&P rose about 6.25 percent, while the best performing sectors for the previous quarter took a pretty substantial hit as investors rotated out for positions formerly at the bottom, particularly in healthcare. Granted, this is a very short term view of the issue, but you get the idea. This is not an example of an extreme in Crowd thinking, but nicely illustrates how sentiment drives money (and therefore, returns) in and out of certain stocks.

The Contrary Investor would argue that what is lacking for most investors is not a strategy, but discipline in applying the strategy. More often than not, investors think they are doing what worked in the past, but really are not. At Fraser Management, our discipline does not focus on sector rotation, but rather on broad themes we believe most investors do not fully understand or do not fully appreciate.

David Fuller's view I commend this issue of The Contrary Investor to readers.

Fullermoney also favours a thematic approach for long-term investing. Tactically, we are interested in adding to these positions when they approach their medium-term trend mean, approximated by a rising 200-day moving average, and lightening when they clearly become overextended relative to that mean. Here is a link to Fullermoney's secular themes.