Disclosure: John Reese and/or his private clients are long KKR, AT&T, Oaktree Capital Group, LLC and Enel Generacion Chile SA. Investor behavior is firmly rooted in psychology, a notion that's evident in all the guru-inspired stock screening models I created for Validea. One of these gurus, however, dug into this field of study more than most others--David Dreman, author of both Psychology and the Stock Market (1977) and Contrarian Investment Strategies (1980). Conversely, if a stock's price has been dropping and the company is making negative headlines, investors typically underprice it. Surprises are common in the market, according to Dreman, and because "good" stocks are often overvalued, positive surprises really can't boost their values much.

Source: Forbes September 11, 2017 19:41 UTC