July 11, 2014

Contrarian money manager Steven Leuthold investing in businesses that many investors consider to be toxic, including uranium mining and Chinese water and pharmaceutical companies. He’ll explain his unusual choices.

CONSUELO MACK: This week on WealthTrack, contrarian money manager Steve Leuthold invests in businesses many investors consider to be toxic including uranium mining and Chinese water and pharmaceutical companies. Great investor Steve Leuthold explains his unusual choices next on Consuelo Mack WealthTrack.

Hello and welcome to this edition of WealthTrack, I’m Consuelo Mack. Look at just about any market’s performance anywhere around the world since the financial crisis and the U.S. market will come out near or at the top. It’s been a great time to be invested in America. Where would you prefer not to have been over the last five years? One place is China, which as you can see from this chart comparing the Shanghai Composite Index with the S&P 500 has vastly underperformed the U.S. market. If you take it down a level to industry sectors of the market, one area you would not have touched with a ten foot pole is uranium. Stocks of uranium companies as measured by the Global X Uranium ETF have plummeted since the ETF’s launch in late 2010. Why on Earth would I choose to highlight China and uranium? Because those are two of the major areas where this week’s guest is investing.

There is a reason he has been called a contrarian’s contrarian. He is Steven Leuthold and he comes by his independent streak naturally. He hails from Minnesota, what he refers to as the North Country. Indeed for three plus decades he published his monthly “View from the North Country” report for institutional clients.

He also founded and ran a leading independent institutional research firm, The Leuthold Group which was known for its quantitative, research and asset allocation. He started an investment management arm there creating seven mutual funds under the Leuthold name and overseeing $5 billion in assets under management at its peak. Then a couple of years ago he decided to call it quits from the tightly regulated mutual fund business, although he remains a major shareholder at his old firm. He also wanted to escape from the pressures of managing billions and his grueling publishing deadlines. Last year he launched Leuthold Strategies, a small private investment partnership geared to high net worth individuals and requiring a minimum investment of $500,000. With a little under 100 million under management now Leuthold plans to cap it at half a billion.

Although most of us can’t invest with him, Leuthold is still worth listening to. I asked him what he is doing differently at Leuthold Strategies.

STEVE LEUTHOLD: We look at things differently. We look at investing in themes, and many of those themes are contrary to the consensus, and if you had to run them through a committee, you’d get 10 no’s and one yes, and the yes would be mine, and so I developed the themes. To give you an example of this, for instance a lot of people look at the new high list, and they want to get the stocks that have the best momentum. Well, when we’re initiating a position, we look at the industry new low list, and then we search in those types of industries for some reason that could turn them around and make them look better. I mean, the airlines were a perfect example two and a half years ago, and then when it comes to time to sell them, well, we also look for a bottoming from a technical standpoint, too, but then when they move ahead then we become momentum investors, and we stay with them as long as they keep going up, because our goal now as we’re running it for individuals is to make sure and try to get long-term capital gains on everything we do. It’s not just the performance numbers.

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