"We look to buy companies everybody else is selling. We like to zig when everybody else zags."
-- John Buckingham, Al Frank Fund

That contrarian strategy has served John Buckingham well. His Al Frank (VALUX) mutual fund has outperformed the S&P 500 (as well as the relevant small-cap benchmark) over the past one-, three-, and five-year periods. Since the fund's inception in 1998, it has earned shareholders annualized returns of 16.6% vs. 4.8% for the S&P 500.

Shannon Zimmerman has employed a somewhat less radical contrarian philosophy while earning market-beating returns in Motley Fool Champion Funds. However, he often uses his "Contrarian's Corner" to highlight higher-risk, potentially higher-reward opportunities. As long as a fund can show a talented and experienced manager, a sensible stock-picking and diversification strategy, and low expenses, Shannon might view recent poor performances as an anomaly.

For an example, let's look at Fidelity Dividend Growth (FDGFX), featured in last November's "Contrarian's Corner." This large-cap core fund has turned in subpar returns for the past three years -- but Shannon believes it may be due for a rebound. Why? The biggest reason is manager Charlie Mangum, a successful contrarian investor in his own right, who's unwilling to overpay for stocks and who invests with conviction. In fact, 48% of this fund's $17 billion in assets is concentrated in its top 10 holdings:

Fidelity Dividend Growth
Top 10 holdings (as of 12/31/05)
Cardinal Health (NYSE:CAH)


Home Depot (NYSE:HD)

Microsoft (NASDAQ:MSFT)

Wyeth (NYSE:WYE)


Clear Channel (NYSE:CCU)

Wal-Mart (NYSE:WMT)

Bank of America (NYSE:BAC)

General Electric (NYSE:GE)

Are you a contrarian?
As I mentioned, a contrarian strategy can carry more risk than other investing styles. But it's probably worth your while to make it at least part of your overall portfolio. After all, investing against the grain often means getting your stocks at very good prices.

If you're not confident being your own market contrarian, take a look at the contrarians Shannon has highlighted in his Champion Funds newsletter. You can learn from their stock picks, or put some of your money in their funds and let them go to work for you. That last choice may not be such a bad idea: Shannon's entire list of recommendations is beating the market and relevant benchmarks 21% to 9% since the service began two years ago. He's currently offering a special 30-day free trial to the service; click here for more information.

Rex Moore yearns for the simple days of yore when basketball players didn't wear long pants. Of the companies mentioned in this article, he owns shares of Microsoft. Bank of America is an Income Investor selection. Microsoft and Home Depot are Inside Value recommendations. The Fool isinvestors writing for investors.