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Stock Strategist

Morningstar's 2006 Contrarian Portfolio

10 stocks for investors who aren't afraid to go against the crowd.

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Contrarian investment strategies posit that attractive returns are earned by investing in stocks that are out of favor with most investors. A few years ago, we decided to test this theory, and started analyzing Morningstar's Web site traffic to compare the returns from stocks that are popular with our subscribers with those that are unpopular. Although we believe that investing in the stocks that are most popular with Morningstar's audience offers a good shot of achieving returns that outperform the market, our research indicates that even higher returns seem more likely in less-popular, or "contrarian," stocks.

At Morningstar, we can directly measure a stock's popularity--or lack thereof--with our subscribers. Using our Web site data, we can count unique page views for each stock we cover, and then create a page rank that measures the stock's popularity with our clients. We define a page view as one client clicking on the Analyst Report for a stock once. This yields a direct, and unique, measure of "popularity." For example, in 2005,  Microsoft (MSFT) was our most-viewed Analyst Report (with a page rank of 1), while  Monolithic Power Systems (MPWRE) (page rank 8,006) was least popular. By creating an ordinal ranking of the stocks we cover using our page ranks, we can easily identify the most "contrarian" stocks we cover.

Justin Fuller does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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