Everybody's a contrarian these days.

It was hard to find one back in 1999, the good old days of the New Economy. The term "contrarian investor" turned up just 42 times in Dow Jones Interactive articles that year. More people like the moniker now -- use of the term soared to 104 mentions in 2002. But this increasingly common usage threatens to make it as absurd a term as "alternative rock" was five years ago.

You can see why it's cool to be contrarian: Fund manager David Dreman tracked market opinions of experts going back to 1929, and found that the consensus was wrong 77% of the time.

The trick is knowing what you stand for -- or, more accurately, stand against. To be a good contrarian, as the legendary Marc Faber says, "you need to know what you are contrary about." Is it contrary to be a bear these days and think the U.S. market is headed for a Japan-style slide? Or does the contrarian think the naysayers on this latest rally are just latter-day bears still stinging from being so giddily optimistic back in 1999?

Devil's Advocates
References to contrarians and contrarian investors have soared since 1999
* Projected.
Source: Dow Jones Interactive.

Will the real contrarian please stand up? To get to the heart of things, we put the conundrum to three bona fide contrarians: Dreman, Faber and Banc of America Securities strategist Tom McManus. Not surprisingly, they contradicted each other. Nonetheless, their conclusions aren't entirely at cross-purposes -- the collective recommendations to consider Japan and Asia, steer clear of frothy U.S. tech stocks, and hunt for value in the U.S. makes a lot of sense.

Dr. Doom Contrarian: Marc Faber

To folks with a limited historical perspective on the markets -- say, five years -- Marc Faber is known as an "unrepentant bear." Not so. He is merely a contrarian, and a highly effective one. But he doesn't mind being known as "Dr. Doom" -- in fact, his useful contrarian Web site is called The Gloom, Boom and Doom Report , which details his efforts to find underappreciated investments and warn against overvalued ones.

What is Faber contrary about these days? U.S. stocks and Japanese bonds. Faber believes the U.S. stock rally may last a few more weeks, but that corporate profit disappointments will bring it to a screeching halt. He also reiterated the sentiment, noted on his Web site recently and in Barron's last weekend, that Japanese government bonds are the "short of the century." The bond market in Japan yields less than 0.6%, far below the Nikkei 225 index. Shorting Japanese government bonds is a bit tricky for the average U.S. investor -- you have to short government bond futures through an exchange such as the Chicago Mercantile Exchange.

But short-averse investors can play the flip side: Buy Japanese stocks, Faber says. Faber's contrarian streak extends to bull calls as well, and he believes the Japanese stock market has hit a major low. A reallocation of assets in Japan from bonds to stocks is in store, Faber says. Faber believes brokerage stocks such as Nomura ( NMR) will reap the benefits, but he said the easiest thing to do is invest in a fund or exchange-traded fund that focuses on Japan -- check out this recent column for a few good fund picks .

Faber is bullish on Southeast Asia, which has suffered from the SARS scare. His contrariness leads him to Indonesia, South Korea and Taiwan -- which is trading at a lower level than during the 1997-98 crisis and has "strong rebound potential." In Indonesia, the NYSE-listed PT Telekomunikasi ( TLK) is among his favorites.

"I would put at least 50% into overseas markets in overseas currencies, and over in Asia the valuation of equities is much lower," Faber said. For what it's worth, not everything in America looks awful to him. He likes oil and mining stocks such as ExxonMobil ( XOM), Schlumberger ( SLB) and gold stock Newmont Mining ( NEM).

A Contrarian Bull: Tom McManus

"I can't always promise to be contrarian, I can only call them as I see them," says Banc of America Securities strategist Tom McManus. His calls have been pretty sharp -- he counseled clients to get out of tech and telecom in early 2000, and started getting bullish during the bleak days of summer 2002.

McManus remains bullish. While he says there is no consensus on the market these days, he sees three groups on investors: "Outright bulls, outright bears and those who think we are in a trading range." Because the range-bound folks think we have hit the peak of the trading range on the S&P 500 when it briefly closed about 1000, he says two of the three groups root against further gains -- making bulls like him contrarians.

He cautions, however, that he isn't extraordinarily bullish -- "we're not going to make all-time highs on the S&P 500 anytime soon." Companies like Nortel ( NT), JDS Uniphase ( JDSU) and Broadcom ( BRCM) have lost billions of dollars in market capitalization. "We're still down about $4 trillion in market cap. If it doesn't come back in these companies" -- which doesn't look likely -- "we have to look at the rest of the S&P 500 and realize it's going to take time," McManus says.

While expecting 15% stock market returns when long-term rates are at 5% is folly, McManus thinks stocks should deliver 9% to 10% on average, "and you can do better than that if you're contrarian -- buy more stock when people are downbeat and lighten up when people are optimistic."

McManus anticipates broad-based gains, meaning investors don't need to spend a great deal of time fretting about which sectors or stocks will post the biggest gains. But he did mention his firm's 10 First Money Focus stocks as potential winners. Among the companies on the list are Boeing ( BA), Carnival Cruise ( CCL), Clorox ( CLX), Comcast ( CMCSA) and Taiwan Semiconductor ( TSM).

Deep Value Contrarian: David Dreman

Dreman, skipper of value-oriented ( KDHCX) Scudder Dreman High Return Equity fund, isn't a Johnny-come-lately among contrarians: His Contrarian Investing Strategies is a great book on the subject. While more folks lay claim to the contrarian title these days, for Dreman contrarian investing is still just another term for deep value investing.

"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), 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.

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