Skip to Content
Stock Strategist

Morningstar's Contrarian Portfolio--10 Stocks to Buy

Popularity doesn't always mean fat profits for investors.

Contrarian investment strategies are popular among value-oriented investors, and in our opinion, rightly so. Stocks that are widely ignored or despised are more likely to sell at an attractive discount to fair value than stocks with heavy analyst coverage or a household name.

At Morningstar, we do a lot of behind-the-scenes research looking to uncover attractive investment returns, and contrarian strategies are a natural fit with our preference for uncovering stocks that are selling with an attractive margin of safety. Over the past couple of years we've been researching our Web site traffic, comparing the returns from popular stocks with the returns from unpopular stocks, and the results surprised us. Investing in the stocks that are most popular with Morningstar's audience offers good odds of achieving market-beating returns, but higher returns seem much more likely in less-popular, or "contrarian," stocks. We're not surprised that many stocks don't attract much attention. We follow about 1,500 stocks, a good portion of which are from overseas markets or obscure industries, and frequently add new coverage. It's probably impossible to keep up with such a lengthy list--but therein lies an advantage. We think that learning more about lesser-known stocks, especially those that have a Morningstar Rating of 4 or 5 stars, can really pay off. To help you get started, we've decided to publicize a portfolio of our 10 best "contrarian" 5-star stock ideas for 2005.