In Good Company with Nicolai Tangen - The mindset of a contrarian investor – Anthony Bolton

Episode Date: July 2, 2025

How can investors profit by going against the crowd? Nicolai Tangen sits down with legendary contrarian investor Anthony Bolton to discuss the art of thinking differently in financial markets. Drawing from his remarkable tenure at Fidelity, Bolton explains why popularity is risk and how the best investment opportunities often feel uncomfortable. The conversation explores why current market dynamics may be creating even bigger opportunities for contrarian investors, while Bolton shares his views on China, US tech stocks, and the future of markets. This episode was recorded on 10 February 2025.In Good Company is hosted by Nicolai Tangen, CEO of Norges Bank Investment Management. New full episodes every Wednesday, and don't miss our Highlight episodes every Friday. The production team for this episode includes Isabelle Karlsson and PLAN-B's Niklas Figenschau Johansen, Sebastian Langvik-Hansen and Pål Huuse. Background research was conducted by Torgeir Rimstad. Watch the episode on YouTube: Norges Bank Investment Management - YouTubeWant to learn more about the fund? The fund | Norges Bank Investment Management (nbim.no)Follow Nicolai Tangen on LinkedIn: Nicolai Tangen | LinkedInFollow NBIM on LinkedIn: Norges Bank Investment Management: Administrator for bedriftsside | LinkedInFollow NBIM on Instagram: Explore Norges Bank Investment Management on Instagram Hosted on Acast. See acast.com/privacy for more information.

Hi everybody! Today we are in really good company because I'm here with Anthony Bolton. And Anthony Bolton, he is in a way in my mind the father of contrarian investing. You know, the best person I know to do the opposite of everybody else and my have you made a lot of money for Fidelity Over the Years doing that. So warm welcome, Anthony. Thank you, Nicola. It's lovely to be here with you. Why can one make so much money by doing the opposite of other people? I think because very few people are doing it. So it's almost by definition. And the trouble in the stock market, if you do what everyone else is doing, it will work for a while, but the more people who get on the bandwagon, eventually it bursts. And I think that's why it's important. My view of investing that popularity is risk and conversely unpopularity is risk. And conversely, unpopularity is opportunity. I'm not saying everything that's unpopular

therefore is an opportunity. But I just, early on, I wanted to look where other people weren't looking. And I always felt uncomfortable if I owned something that everyone else owned. Not many people do that way. That's the point. That's why I think it works. So when you think about being contrarian, what is it? What does it entail? I think it entails, I think it's something in the personality that you feel comfortable about being different. I think most people are, they like the comfort of the crowd. They like to be reinforced. They like the people around them to be telling them,

you know, what you're doing is good. It's what I'm doing and what everyone's doing. So I think there's something in the makeup of a contrarian that is really important. And it's very difficult to put my fingers on it because often my colleagues at Fidelity say, how can I become a contrarian? And I think you need to start,

I don't think everyone can do it, put it that way. So there has to be something inside you. And what is that? What is that something? And it's so difficult to put one's finger on it, but it's the ability to back your own convictions, to be unemotional, and to be patient, I think, is part of it. Because often you're going to have to wait a bit. Do you have any friends?

Like do you have some friends? Thank goodness. But what I mean is if you crave for people to like you, you are probably not a good contrarian, right? Yes. I don't know. I don't think likeness and dislikeness comes into it. I mean, that's more to do with people's characteristics. But it's, you know, what people say, it's lonely being a contrarian, which is slightly different. I mean, it doesn't mean that you don't have friends, but you're sort of out on a limb. And you know how it is investment.

I often found the best opportunities were the uncomfortable ones. By the time it was comfortable, it was late. And it still might be all right for a while, but you have to be prepared to be in uncomfortable situations. What does uncomfortable mean? Uncomfortable means that other people are,

you're doing something that other people and several people will probably tell you it's wrong. I think, funny enough, I think one of your recent people you were talking to said he gave a medical example of somebody who made a big stride in cancer research. And they said at the time, the guy was terribly unpopular because he was going against conventional wisdom. So you have to be somebody who's happy, I think, to go against the conventional wisdom at times, not all the time, but at times. Now, an emotional, are you an emotional?

I am an emotional. Like are you on the spectrum, you think? I don't know where, I don't think I'm extremely unemotional? I am unemotional. I think... Like are you on the spectrum, you think? I don't know where... I don't think I'm extremely unemotional, but I am... I can take success and failure pretty much the same. And now that's really important for investors. Don't let the successes get to your head, because everyone has successes. But conversely, everyone will go through a bad phase and don't let the bad time get to you.

That's the bit that gets to most people. So how would I describe it? I think if you get very worked up about investments, I think in general, that is bad in this business. You know, you have to stand, you have to take yourself sort of somewhat out of the situation and look down from above impassionately. But you spend all your life looking at your portfolio or meeting companies, thinking about

these things. How can you be unemotional about what is your life? I think unemotional committed, involved, it's as you notice the most fascinating business to be in, to meet all these companies, to be in touch with all the great trends in the world. But it's at times, don't underestimate the market's ability to discount. I think the mistakes so many people do, they often talk about what's the outlook? Is the outlook bright? Is the outlook poor? But the key thing is what outlook is discounted in the stock market at the moment. It's not the outlook.

It's how your view of the future compares with what's discounted in the stock market. When you look at the stock market, what are the type of things you look at? How do you gauge the stock market's mood, for instance? What are the indicators? Okay. I was someone who liked to look at a whole amalgam of things. And I always say, look, what I looked at wasn't necessarily different from what most people, perhaps how I mixed it together. It's interesting when I look at a stock, often the first thing I look at is the chart.

I want to know, you know, the chart immediately tells me. So the chart being the stock price, right? Stock price. So I'm putting a chart in front of you. What are the things you look at? So the first, you know, it tells, am I early or late? Is this a stock that's done well for a long time? You know, which probably means I'm late. Doesn't always mean I'm late, but probably.

Is it a stock that hasn't done well? And those were the ones I particularly like, you know, to screen for, because I'd look at them, some of them were no good. They're always going to be dogs, duds. But particularly if there was change, if there was change in the management or the portfolio of businesses that they were in,

or the environment was changing for the better. Then I'd look, especially with UK companies, I would look at the shareholder list. I found it's a very underrated thing to look at shareholder lists and what I was looking for is are the funds that I rate already owners of this company. This is particularly so in medium and smaller companies and that was very much the heart of my approach. I mean, as the funds got bigger,

I bought more big companies, but I think my greatest love was in medium, small companies. Cause you could, if you did your work, you knew that you knew more on those companies than most people did. And what were the type of shareholders you would have liked to see? I mean, I can't, you know,

I'm 10 years out of date from doing it or even longer, but there were certain funds that I rated and it was interesting. If I saw lots of them there, then I knew I was late. They had all discovered it before me. If I saw none of them there, I mean, that might be a great sign

or it might be just it's a terrible business and no one's ever going to buy this. Perhaps the best were maybe there was already one other fund that I rated and that sort of said, well, they've already picked this up and then, but it leaves lots of room for other people to come in later. Did you look at buy and sell recommendations and so on,

or what did you do with those? Yes, I, you know, the two great things of the stock market, the weighing and the voting, most people spend all their time on the weighing. And I wouldn't underestimate that, and obviously our analysts spend all their time on the weighing. But the voting was the bit that I really was interested in,

trying to measure sentiment in stock. And that's ownership and things like insider dealing. That was really important to me if the insider trades confirmed or conflicted with my view. So that the CEOs were buying, for instance. Well, yeah, the CEOs were buying. But I also use charts as a sort of confirming or not confirming sign. People find that difficult, you know, Anthony, why do you think charts are important?

But if the chart confirmed my fundamental view and my general view, I might take a bigger position. And if the chart didn't, if the chart started to roll down, it's something, it was one of the factors, I might cut back my position because it was always incremental to me. I never came in one day and bought a huge position in a company. I was normally building something up as my conviction increased. And then the share price moved or something changed, and then probably I was reducing it. So that, that for me, it wasn't black and white.

And management, you did management meetings. Management was really important. You know, I, at the height, I was doing four companies a day, but it was remeting. Just in one meeting, I find people impressed you, but it's seeing how the story develops and are they consistent in what they say? How do you decide the entry into a contrarian position?

As I say, the whole amalgam of things that I looked at and when I thought it was interesting, I would buy a position, but I'd normally start, it was normally at half a percent, so 50 bits type position in the company. And then as my conviction increased, I might go up to 100 and then up to 200, and then I have a few positions where I perhaps got up to 400. It was interesting, in the early days,

I thought of everything. So 400, that's like 4% of the portfolio. Yeah, off the portfolio. In the early days I thought of everything absolutely because obviously in the last 10, oh no, last 20 years or so, one thinks much more in terms of relative positions than absolute positions. But that's how I did it. And I normally had a thesis on it. One of the things I particularly liked were asymmetric returns. What does that mean? So stocks where I thought the downside was limited,

but they might, in certain circumstances, have a lot of upside. So the upside and downside wasn't the same. In a lot of stocks, well, they might have a lot of upside, but they also can have a lot of downside. So the downside was protected by maybe a very strong balance sheet or a business with very good cash flows or whatever it is,

but they had something like a drug discovery or they were drilling for oil or something that if they were lucky, this could make a huge difference to the valuation. What would be the most contrarian thing you can do just now, you think, in the market? China. To buy China? To buy China, definitely. I mean, look, every other market in the world, not every, but nearly every market is near its high. China's near its low. So China must be the contrarian position at the moment. And how would you fund that? What would you sell? America. The whole of America?

America, everyone loves. Valuations are high, all the money is going into America. The other thing I think is very important in investment is often divide the journey from the arrival. Markets move during the journey, and normally when you get to the arrival, that is the end of a trend. So I think in America, you know, the inauguration of Trump is the end of the journey up to that. With China, everyone's been scared of the tariffs,

you know, for months and months. I think the date the tariffs come could mean the turning point. Well, they came today, right? Yeah, so maybe it's today. And the other thing, look, when I look at, and I think some of the idea that AI only rubs off on a small handful of US stocks makes no sense to me. And I think some of the China-

So what do you mean by that? So you know, AI has driven the magnificent seven or six of the seven, you know, to new higher and higher levels. And I'm not belittling AI, but the stock market loves these sort of situations. It's so similar to the dot com. And the stock market loves it and drives up the stocks in anticipation. But the idea that only a handful of companies are going to have the control, the AI, and you've seen in the last few weeks, some of that rub off to China.

So I think American tech into Chinese tech. Now, look, I'm not belittling everything, all the risks to do with China. I mean, the economy has got problems, the geopolitical situation is risky in China. But what are the domestic investors in China going to do? We've had a three-year bear market. The authorities in China want the stock market higher.

The authorities in China want the stock market higher. Bond yields are at record low. Are they going to go back into property? I think not in a hurry. Gold has done well. They've gone into gold. There's really one other place they can go to, which is equities. So, yeah, my view today is that we're in the early stage of a new bull market in China. Just going back to the US, where does crypto fit into this? Not much for someone like

me. I just can't analyze crypto. But to me, it's one of the signs of excess. So if you're looking for a market that's high and has excess, then crypto is an indication of that. You think it's maybe the end of a bull market or some signs. But just how do you expect it to unfold? I don't know. Nowadays, the bear markets tend to be sharper and happen quicker and they're over quicker. I don't think I can predict how it is, but I'm just saying in the way I look at markets and cycles,

the US market is near the top of its phase. You know, nothing goes up in a straight line in this business. And, you know, and the very fact America's, you've had 20% return, whatever it is, for two years running. It just, you know, when things are high and the valuations are high, I just think your odds as investor reduce of making money. Okay.

So super stupid question. Why don't you just sell when it starts to go down? Well, you never quite know, do you? No. If it was clear. And that's the trouble. And look, you know, I, Nicola, I'm someone who said most of my time in investment, I don't want to take market bets.

Now, I've given you some market views because I'd rather find something, find your competitive edge, find your competitive advantage. For instance, you know, there are a thousand investors trying to second guess the Fed. Where am I going to have a competitive advantage? That's why mainly I like to look at companies. So even with a market view, I wouldn't bet my whole portfolio on that. So you don't spend a lot of time on macro? No, no.

And is it different being a contrarian investor in a bull market versus a bear market? What are the other different characteristics? Is it different in a bull market versus a bear market? That's an interesting question. I haven't really thought of it in that context. One of the things I found in the bull market, my number of holdings went up. I could find more interesting situations. And in the bear market,

normally I prune back the number of holdings. I tried to concentrate. It's one of the things I say when managers are doing poorly. You know, try go through every stock, every, you know, the reasoning for owning every stock and concentrate where you're strongest. The other thing I think is really important in investment is listen to the other view. I think, and perhaps it comes back to this sort of, most people listen to the views that

confirm Google's an amazing investment, so everyone will listen to the bulls about Google. If I had a big position in Google, I'd be spending most of my time listening to the bears of Google to see what's changing. And I think that's very important. Listen to the counter view. Listen to the shorts. If you've got, if you're long of something

and you see the shorts out there, try and find out why the shorts are short. Do you find the short sellers are good? I don't think I have a sort of special view. There aren't so many left of them after this market, I guess. But I always give the famous case of a company I owned, it was actually an old company, of a company I owned, it was actually an old company. And we had a position as a house. And one day I had a meeting with Hedge Fund that was short of it. And I was sitting there and after 10 minutes,

it just hit me like a flash that they were right and we were wrong. And so, and that's, you know, when you're dealing with grey, not black or white, it's grey. I think hearing the counterview is really important. Do you think the difficulty in being a contrarian investor is that you may lose your job? I mean, now you're not going to lose your job now by owning the big seven companies, are you?

That's the whole point. That's why there's so few of them around. And I remember, you know, in the dot-com bubble, the great P&D, somebody died. He was sacked, I think, within two months of the peak of the bubble, the internet bubble. And that's the trouble. So many people are so short-term and no approach works every year, year in, year out, in my view. And you've got to find what works for you and stick to it. in my view, and you've got to find what works for you and stick to it. I am cautious about people who say they can, you know, I can be a growth investor in this environment and then a value investor and then something else. I don't think that's easy for an individual anyway.

How long can you be wrong before you change your mind? How stubborn are you? Well, that's an interesting thing. I think it's to do stubbornness versus conviction. You mustn't let conviction. One of my colleagues said they were on the edge of their seat with stocks. I think that you have conviction, but you've got to be open to changing that. I think that's terribly important, so stubbornness. But it's a difficult business because in my view, you can get by with luck for three years. I think over three years, it's skill, it's not luck, but anyone's record less than three years might purely be luck. Or the opposite, might be lack of luck. Now, how do you know when you're wrong? How? I think it's the keeping the open mind.

I think keeping the open mind, look, you know, getting it right 55% of the time is great. So 45% of the time you're gonna be wrong. So you've got to realize that this is a business where we're gonna have a lot of times we're wrong. And you just gotta learn from it and move on. is a business where we're going to have a lot of times we're wrong. And you just got to learn from it and move on. One of the things I always say is

the things that often differentiate the good managers from the bad managers is not the successes. It's not having the losers. I think if you can cut out your losers, that can take you from an average or a better than average in up to the top quarter. How do you deal with stress yourself? I suppose maybe that's why I was good contrarian.

It didn't get to me. Yeah, obviously there were certain times it got to me. And after the great market crash in 87 and stuff, it does keep you awake at night for a few nights thinking, gosh, has this all changed? But I think the whole point is I could, I could cope with stress and which, which meant, I guess, that I could switch off. And that's when you compose music? That's when I, I didn't have that much time for writing music when I was running money day to day. But yes, that was one of the things, family, whatever it might be.

And now you compose church music. And now I compose a range of music, but I've written two operas. That's been the main thing that I've done, the biggest things that I've done. Wow, that's impressive, that's impressive. Now, how do you avoid overconfidence? How do you stay humble after such a long, successful period?

Well, I think this is why you've got to analyze yourself in this business. And I think a good degree of humility is really helpful. So I'm slightly, if people are very arrogant, and therefore to me, that means not always, but often they're not willing to analyze themselves and know their failings, et cetera. I think that's important. I think humility sort of helps. Is that part of the corporate culture, where you were? We like to have a range of people.

I think it's very dangerous in this business to only take one type of person into it. I think you've got to have a range of people with different skills, et cetera. But yeah, if people were very emotional, you found that out quite quickly. I'm not saying never to that, but I think often that was not going to help them. Just moving on to the market and how it's changed. So with all the passive money, trend following and so on, just how have things changed in the market? I think it makes the trends go on longer. That's definitely the case. And the quality of the competition goes up the whole time.

So it was easier to do it 20, 30 years ago when not everyone was visiting the companies, the amount of information wasn't there, the ability to process information has changed. But funny enough, you still get big anomalies. This is the fascinating thing. And almost the dumb money produces the anomalies at some times. And the trend goes on for longer. So it's a longer wait and people can't do the waiting, as it were. But it does change. So what is not...

Some people think the markets have become more efficient over time, people are much better, therefore the anomalies have disappeared. Well, no, in some ways, some of this creates new anomalies. So the correction comes later, but when it comes, it's bigger. Yeah. Yeah. How do you build an organization where there is room for people who think differently like this? How do you construct?

How do you make an organization? How do you? I think there were common things to our approach, the way we do it at Fidelity, of having a team of analysts and a team of portfolio managers. And most people came in as analysts, trained as analysts, normally did three rotations as analysts in different sectors, industries they covered. And then if we thought they had it in them after that, they gave a chance to be a portfolio manager. So that was common.

How they approach things were different. We had some great growth managers as well as contrarian value managers, income managers, et cetera. So what we didn't have was one style across the whole of fidelity. And in fact, I was particularly more in a management role as I've been the last 10 years, terribly keen to make sure that we had different funds with different approaches.

Because as you know, approach can stay out of favor for quite a while, like value at the moment. And therefore, you need a mixture of different funds. And that's what we tried to do. If you get a whole room to agree on something being a good idea, is it then normally a good idea? No. No. And that's the, you know, like decision making

by committee investment is normally doesn't work because by the time everyone agrees, you probably catch the tail end of something. And it comes back, as I was saying, you know, often the best opportunities you feel relatively uncomfortable. So I'm your analyst, I come to you and I pitch these ideas and it's just like, Anthony, I think it's really great.

And you said, yeah, well done. And then you do the exact opposite. Yeah, I mean, the analysts know, you know, the fund manager is not going to do everything that they say. But one of the things obviously we look at is how much a fund is in line with what the analysts are saying. And I think that's important. And so there's no requirement on our fund managers.

I found it was often timing because as a contrarian, you were often a bit earlier. The other thing, when my funds got very large, the UK special situations at one stage, I think it was five times bigger than the next biggest mutual fund in the UK. Well, because you were doing so well, because it had done well. But that was a constraint in the future.

So I knew in order to get a decent position, I couldn't often wait till the stock had turned and it was on its way up. The liquidity was when the stock price was still low. Another thing that I often say at a slightly different point, but when you run large funds, I tended to have more holdings. And it's really important that you balance how much time you spend on looking at the positions you already have versus looking for new positions. Often, it's called defensive investment versus offensive, which is going out for new positions. Often it's called defensive investment versus offensive, which is going out for new things. And the tendency is when you run a big fund

to spend too much time defensively and not enough time offensively. What do you think is the right space of time? I don't know if there's a right. I think it's making sure maybe a quarter of your time at least is spent offensively going out looking for new ideas. And the way I did that was particularly using the fidelity team of analysts and some of the portfolio managers. I couldn't go to every meeting of a stock I owned,

so I'd use them to report back to me. But I made sure I went to enough meetings of the ones I didn't own, but I thought I might want to own. So that was important. But it's an interesting philosophical question, you know, how much time do you spend on things you already like? I mean, how do you go back to your old favorite hotels,

or do you check out some new things, you know? Yeah, you have to keep checking new things. Chicken and fries every night, or do you sometimes try lasagna? But you know? Yeah, you have to keep checking new things. Do you have chicken and fries every night? Or do you sometimes try lasagna? But you can't forget, oh, conversely, you can't forget about the things you own because the world changes, you know? It never stays the same.

Do you think young people are, is it more difficult to find young contrarians now given social media, eco chambers? That's an interesting question. I don't think I can give you a definitive answer to that. I think each era breeds, you know, the majority of people, if you lived through a time like today, the recent five years or whatever, it's been about growth, growth, growth. Obviously, most new investors are going to be influenced by that. They don't have the long-term perspective to put this cycle in the context of the longer cycle. So, yeah, I think there's an element, you know, we'll go through a good period for value

and then probably all young people will want to be value investors. But that will be wrong. Where does Europe fit into that just now? I don't know on Europe. Is Europe in a way just the opposite of America? So if the US market goes down, Europe will do relatively better. I don't think it's as black and white as that,

no. Look, and not everything in America is uninteresting. I mean, there are a lot of very attractive value stocks in America. So I'm not going to paint tar the whole of America with the same brush. But European markets are also near their peak, so it's not as if Europe hasn't moved to date. Someone who spent four years in Hong Kong running a Chinese hund. I mean, you sort of feel that the East is going to be there, the next decade or two is going to be dominated by so much baggage from the past. Moving into the governance models here. When you are a contrarian portfolio manager and you do the opposite of everybody else, you can be wrong for a long period of time.

What are the implications for how you should remunerate people? Okay, that's interesting. Most of our remuneration based on one, three and five years and the most on the three. And often it might be just the one in three years. I think then you've got to have some view of their long-term success. I've had, in my time, I had three bad years. In a row or? In a row, yes. And that was the worst time. That was the 89. Yeah, it was sort of the- 89, 91. Yeah. And Fidelity stuck with me. I didn't get the bonus that I got in the good times, but they stuck with me. How bad was it?

Oh, you know, it's bad. After three bad years, you start to question and then it comes back. None of us so believe in what they do. It's the sort of business that every day you think, gosh, do what I know and what I think I know and my experience, is it still valid? You question yourself, but I felt it was. But how do you remunerate? I think management has to,

I think one gets over time, but it does take time, a view these managers with the style we think are really good at what they do. And when they come into a bad patch, and the bad patches are probably longer because of the dumb money, the passive money, making the trends go on longer, you have to bear that in mind. I can't be specific on remuneration, but I think we were aware of that.

Yeah, I think probably an institution is not more contrarian than the weakest link, right? So if you have a management committee which doesn't accept it, then you have a problem or a board which doesn't accept it. Yes, that's true. But you have to have the management committee has to come back to this thing that we need different runners in the race. And the whole history of investment, something that's done well for quite a few years, is probably not going to be the thing that's going to do well for the next few years. I think that's one of

the mistakes. People think, it's so strange, they think these tech stocks can go up every day forever and ever. I mean, they don't realize there's a cycle to everything. It's not because they're bad businesses. It's nothing to do with the business. It's to do with this voting factor, the sentiment, the sentiment overdoing things. And it's why I think it's so important to measure sentiment. Can you take the contrariness to other parts of your life? I mean, writing operas is not necessarily mainstream. Yeah, I don't think you can. People ask me that, you know, does that make your whole

life contrarian? No. I mean, I have things that I love and things I don't love, but they're not necessarily extremely contrarian. I know it's rare to find people who write operas, but that is rare rather than contrarian, if you see what I mean. Well, Anthony, not many people like you

are on anymore, unfortunately. It's been a true pleasure having you here. Nicola, thank you for sharing your... It's been a delight to talk over things with you. Thank you.