Bargains in Wall Street's Growth-Stock Rejects

It isn't easy being a contrarian. And the biggest battles are emotional. "You have got to be willing to step into situations which make a lot of other people uncomfortable," Barish says. "You've got to be comfortable with anxiety."

And you need patience as well as nerves. Barish says that on his big bets he makes most of the money in the second and third years. These big ships take a while to turn.

And, of course, if you want to succeed, you have to do your homework. That's how you pick the oranges from the lemons.

Barish still tells the story of investing in Philip Morris (a.k.a. Altria(MO Quote)) back in 2003, when litigation panic had sent the stock into freefall. Barish studied the law in great detail -- and reached the conclusion that the company's legal defenses were "impregnable."

Profits since then: nearly 300%.

I asked him if he had any interest in the current Wall Street rejects: the automakers and the homebuilders?

In a word: no.

He thinks Ford(F Quote) and General Motors(GM Quote) "are probably, technically, bankrupt on a long-term basis when you include the contingent liabilities," such as pension and healthcare costs. And despite his remarks on Home Depot, he expects deepening misery among the homebuilders.

Barish calls Wall Street "fairly valued" right now in relation to earnings, although he concedes that those earnings are at record levels. If you believe in mean reversion, you would expect profits, and shares, to fall a long way.

Barish wouldn't go that far. Nonetheless, he believes that, after almost five unbroken years, the surge in corporate profits "is unsustainable, anyone can see that," and he suspects we may see a period of "anemic" profit growth over the next few years.

After watching March's weird selloff, he expects similar, or worse, ahead. "Would I throw a lot of fresh money into the stock market today? The answer is no. I'd wait for some kind of selloff. I think it's reasonable to believe something will happen over the next few months."