Contrarians' Day: Will the Real Contrarians Please Stand Up?

"Back in 1999, there were no contrarians -- after a market break, everybody is," Dreman joked. These days, Dreman is still very much contrary about the Nasdaq Composite. "It's basically running on fumes. The price-to-earnings multiple for the year is about 35, if you believe the estimates," Dreman said. "But this is getting to be an old comedy act -- raise the estimates in the first half, then lower them in the second."

Dreman says the Nasdaq may still go up 35% or more before fundamentals drag it down, but he is shying away from the tech sector. Besides, he finds that a bundle of value stocks are still relatively cheap, despite the broad-based recovery.

Of course, Dreman's contrarian approach of scooping up unloved, trouble-plagued companies carries risks, too. But his fund's three-, five- and 10-year average annual returns rank in the top 8% of all large-cap value funds -- it's hard to argue with 8.64% a year on average during the past three years.

Among Dreman's current contrarian favorites these days is Altria(MO Quote), the litigation-besieged tobacco giant. "This stock is extremely cheap, trading with a P/E of 8 and a dividend yield over 6%." Dreman thinks the litigation landscape is starting to improve for the company. Meanwhile, he values the firm's oversees business at about $28 a share, and its Kraft stake at about $22. At the stock's current price of just under $45, the $4 billion-a-year domestic tobacco business is worth less than zero.

"A full turnaround may be 18 months to two years away, but this is a company with reasonable growth that has a multiple less than half the multiple of the S&P 500," Dreman says.