Market legend and British noblemen, Baron Nathan Mayer Rothschild, eloquently described the contrarian investment thesis as: “buy when there is blood in the streets,
even when the blood is your own.”

History has been kind to Baron Rothschild’s theory and recently two Australian companies proved him right again.

Shareholders were quick to savage the share prices of both Ardent Leisure Group (ASX: AAD) and Sirtex Medical Limited (ASX: SRX) after significant announcements in the past
two weeks, providing exceptional contrarian investment opportunities.

Ardent Leisure Group, the operator of Dreamworld, White Water World and Kingpin Bowling centres announced the departure of its long-serving CEO Greg Shaw, in our view
one of Australia’s best managers.

After close to 13 years in the role and an enviable track record of achievement, Shaw announced after the market close on Tuesday 11 March he would retire to make way for
former magazine editor, Deborah Thomas.

The announcement shocked the market, as it was critical of Thomas’ non-traditional background in media and limited public company experience.

The market reacted immediately, driving down Ardent Leisure’s share price by 28% to $1.75 when the market opened the next day, wiping $335 million from its market
capitalisation from $1.1 billion to $765 million. At the end of trading, Ardent shares had recovered some ground to $1.965. By Thursday’s close, shares recovered to $2.06, a
clear sign the market had overreacted. Today, Ardent is trading around $2.24.
The markets are emotionally driven and are prone to overreacting. Successful contrarian investing is about smelling the fear and acting decisively – if done correctly the gains can
be significant in a short timeframe. Buying Ardent at the bottom for $1.75 and selling today at $2.24, the astute investor could have pocketed a 28% gain.

Like Ardent, Sirtex Medical Limited, which researches, develops and commercialises medical products for the treatment of liver cancer, delivered disappointing news on 16
March 2015. It’s flagship liver cancer treatment failed to show a ‘statistically significant improvement’ in a key trial. Shares crashed 55% to $17.53 down from $39, with $1 billion
in value disappearing.
As with Ardent, the bounce in share price was swift and steep. The afternoon trade sawthe shares rise 30%.
Again, the Rothschild adherent could have gained 52% in two days buying Sirtex in the open for $15 and selling at $22.80.

Many negative announcements present buying opportunities when the market overreacts. Profit downgrades are an entirely different matter, as the first one is usually followed by
another, thus driving the share price lower again.

In both the Ardent and Sirtex cases, the market showed its propensity to pass negative judgement almost immediately and whether the fundamentals of the businesses have
changed remains to be seen. In the short term at least, these events show the great opportunities available to investors interested in a bet against the market’s efficiency.