"The surest way to work up a crusade in favor of some good thing is to promise people they will have a chance of maltreating someone," wrote H. L. Mencken. This observation, though penned a century ago, captures the visceral energy behind many of the market's most violent rotations. In the context of modern investing, the "good thing" is often a shift in social values or a new technological paradigm. However, the momentum for these shifts is frequently amplified by the psychological satisfaction of "maltreating"—or in financial terms, aggressively devaluing and ostracizing—those companies that represent the old, the unfashionable, or the morally complex. For the contrarian investor, these crusades represent some of the most lucrative opportunities for alpha generation, provided one can distinguish between a company that is truly obsolete and one that is merely being punished for the sake of the crusade.
The Mechanics of Market Ostracism
Market-wide crusades often begin with a legitimate shift in fundamentals but quickly descend into a performative abandonment of assets. This was perhaps most visible during the peak of the Environmental, Social, and Governance (ESG) movement between 2019 and 2021. As institutional capital sought to align with sustainable causes, the chance to maltreat the fossil fuel industry became a badge of honor for fund managers. Major pension funds and endowments didn't just sell their stakes in companies like ExxonMobil (XOM) or Peabody Energy (BTU); they did so with public proclamations that served to further depress the valuations of these firms. By late 2020, Peabody Energy had plummeted to nearly $1.00 per share, as investors sought the psychological reward of purging "dirty" energy from their portfolios. The crusade had promised that by maltreating coal, the world would be saved. Yet, the underlying global demand for energy remained robust, and by 2022, BTU was trading above $25.00, rewarding those who recognized that the crusade had ignored the reality of global energy density requirements.
The Resilience of the Pariah’s Balance Sheet
The most enduring targets of these financial crusades are the so-called "sin stocks," particularly the tobacco sector. Companies like Altria Group (MO) and Philip Morris International (PM) have been the subjects of a multi-decade crusade. Investors have been promised that by shunning these stocks, they are participating in a public health victory. This social maltreatment has a tangible impact on valuation: tobacco stocks almost always trade at a significant discount to the broader market and offer dividend yields that would be unthinkable for a typical consumer staples firm. However, the crusade often fails to account for the extraordinary pricing power and capital efficiency of these businesses. Altria, for instance, has managed to deliver consistent returns and dividend growth for decades, precisely because the lack of new competition and the steady, if declining, demand create a cash-flow machine that the market refuses to price at a premium. The contrarian realizes that the "maltreatment" of the stock price is effectively a subsidy paid by the moralizing seller to the pragmatic buyer.
Timing the End of the Crusade
The difficulty for the contrarian lies in determining when a crusade has reached its peak and when the "maltreatment" has decoupled from reality. A recent example can be seen in the 2022 collapse of Meta Platforms (META). As the company pivoted toward the "Metaverse," a crusade formed against its leadership and its core business model. The narrative became one of inevitable decline, fueled by a desire to see a dominant and controversial tech giant fail. The stock was punished, falling below $90 as investors "maltreated" the valuation in a rush to the exits. Yet, the core advertising business remained a dominant force with massive margins. The crusade had focused on the perceived arrogance of the pivot while ignoring the billions of daily active users. Within eighteen months, the stock had rebounded to over $500. The lesson for the investor is that the crusade usually ends when the cost of maltreatment—the missed gains or the excessive yields—becomes too high for even the most righteous investor to ignore. Successful contrarianism requires the emotional detachment to see the crusade for what it is: a temporary misalignment of price and value driven by a very human need to belong to the "good" group by punishing the "bad" one.