Investing strategy: Veteran Barry Norris shares strategy, short stocks - Business Insider

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Investing veteran Barry Norris is beating 95% of his peers by betting against the market's riskiest companies. He warns investors against the 'siren call' to own value stocks — and explains why he's now bearish on Rolls-Royce.

16% to investors compared to the Lipper Global Alternative Long/Short Equity Europe sector, which returned -0.8%. The fund is beating 95% of its peers as its ranked fourth out of 87 funds in the sector based on this years performance.

"If you get surprises and disappointments in terms of what the company actually delivers over the next couple of years, that's where you'll make money as a stock pick," Norris said. The most dangerous time for the portfolio is when the market decides to tolerate much risk, Norris said. Sharp, short bursts of risk-on environments can make it challenging to run a short book as a market hedge; it's difficult to make money in an uncorrelated way simply because beta is delivering the performance rather than alpha, Norris said.

Norris believes investors should be cautious of the "siren call" to buy riskier stocks such as value stocks, which tend to have higher volatility and perform well in short, sharp spurts but have had relatively poor returns over the last decade.Rolls-Royce is one example of those very risky stocks in the market that Norris is shorting.

 

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