What a surprise: On a year-to-date basis, Mr. Market continues to like energy stocks. Indeed, despite the recent volatility, the Big Oil club still looks relatively swank, what with oil trading at more than $70 a barrel. To be sure, some members of the club still seem to sport reasonable multiples -- ConocoPhillips
When the sun shines on one pocket of the market, other areas get left in the dark. That provides savvy investors a choice opportunity to buy tomorrow's winners while they're trading at a discount.
Danger, Will Robinson
Make no mistake: The contrarian route can be fraught with peril.
Slumps can be hard to shake, and sometimes stocks that look like stone-cold bargains just keep getting cheaper for reasons that are hard to fathom.
For my money
Given that Mr. Market moves in mysterious ways, I think the best way to be a contrarian investor is via diversified mutual funds that traffic in out-of-favor fare. As it happens, we've uncovered a clutch of picks that fit that description at Motley Fool Champion Funds, the newsletter service that I head up.
One such Champ (as we like to call 'em) has all but taken a pass on energy stocks, favoring the discounted likes of H&R Block
Has the fund suffered a short-term setback for its managers' cheapskate ways? Sure -- at least on a relative basis. For the three years that ended with April, its annualized return of "just" 12.36% lags the S&P by more than 2 percentage points.
But you know what? That recent performance history makes me like the fund's forward-looking prospects all the more. Its management team, after all, has notched a long-term record of market-beating success by zigging when others zag -- which is precisely what appears to be going on right now.
All shall be revealed
If you'd like to learn more about this fund and why I think it's likely to outperform the market in the years ahead, just click here for a free 30-day guest pass to Champion Funds. Your pass provides access to our archives, members-only discussion boards, and complete list of recommended funds -- a group, by the way, that's beating the market by nearly 11 percentage points as I type.
Champion Funds also provides model portfolios -- asset-allocation starter kits that help you cherry-pick funds and put 'em together in a pie chart that's tailor-made for your risk tolerance and investment timeline.
Interested? Good deal. Your guest pass is just a mouse click away.
This article was originally published on May 2, 2006. It has been updated.
Shannon Zimmerman runs point on the Fool's Champion Funds newsletter service, and at the time of publication didn't own any of the securities mentioned above. Home Depot is a Motley Fool Inside Value pick, and eBay is a Motley Fool Stock Advisor pick. You can check out the Fool's strict disclosure policy by clicking righthere.