Dreman Rolls the Dice on the Credit Crisis

The mortgage meltdown has left a lot of carnage on Wall Street. Over the weekend, Citigroup (C Quote) CEO Charles Prince resigned as the firm said it would take writedowns of $8 billion to $11 billion to cover additional losses on securities backed by bad mortgages.

Merrill Lynch(MER Quote) last week ousted CEO Stan O'Neal after the firm posted a $7.9 billion writedown on mortgage-backed securities. Other investment banks, such as Swiss giant UBS(UBS Quote), have issued profit warnings.

It's times like these, when Wall Street is littered with the bloodied remains of problematic companies, that David Dreman, one of the biggest contrarians in the mutual-fund industry, lives for.

Amid the dregs, there are also battered companies with few if any problems. Dreman, the chairman and chief investment officer of Dreman Value Management, looks for cheap, down-and-out companies with low price-to-earnings ratios, then buys up the innocent victims and profits as they recover.

"There are major opportunities in a crisis," Dreman says. He notes that the current situation is "not a stock market crisis" but "a liquidity crisis that's affecting the stock market."

Dreman Value Management runs $20 billion in mutual funds and institutional accounts. Its flagship, $8.9 billion (KDHAX Quote)DWS Dreman High Return Fund (KDHAX) returned an annualized 14.275 over the past five years, topping the S&P 500 index by 1.63 percentage points, according to Morningstar.