Contrary to popular opinion, it's getting harder to find a contrarian opinion on Wall Street.

Not too long ago, the stock market overflowed with companies suffering from the aftereffects of bubbles or self-inflicted scandals. Meltdowns at high-profile outfits such as Time Warner ( TWX) and accounting misdeeds at big companies like Tyco ( TYC) were delivered on a regular basis to an investing public eager to kick the downtrodden while their stocks went down.

Meanwhile, the fallout from the good folks at Enron leveled the energy and utility sectors, collapsing the once-quiet realm of coupon-clipping widows, orphans and value investors.

The result of all this carnage was a contrarian investor's dream. The Street became so strewn with the carcasses of once-proud companies that contrarian fund managers were practically tripping over them. The key to their success, of course, was finding the proverbial babies thrown out with the bathwater.

"Sometimes when a stock is hated so intensely there is a legitimate reason for it to get pummeled, but often times people are just pricing risk incorrectly," says David Decker, portfolio manager of the $2.7 billion ( JSVAX) Janus Contrarian fund.

Decker's prowess in pricing risk during those salad days paid off. In 2003 and 2004, his fund gained 53% and 23%, respectively, nearly double the returns of the S&P 500. And year to date, Decker's performance has been far from shabby. He's up 6.7%, or more than seven percentage points ahead of the index, so far this year.

Nevertheless, Decker says great contrarian ideas are getting tougher to find as the market -- according to his trusty discounted cash flow model -- has grown more expensive. As a result, he has been forced to look abroad for equities with the perfect contrarian mix of low cost and investor disenchantment. The Janus Contrarian fund now holds 40% of its assets in foreign stocks, according to Decker, with the largest weighting in Indian infrastructure companies.

But what about the market's current whipping boys, the pharmaceutical stocks? Aren't they feeling enough hate for Decker to love them?

"It's been tempting, but they are just not cheap enough to jump in," says Decker about the likes of Pfizer ( PFE) and Merck ( MRK). "The return on capital, which in their cases is research and development, has been declining and there's no evidence it's turning around."

Compared to Decker's fund, which currently doesn't hold a single drug stock, the $21 million ( JICAX) JPMorgan Intrepid Contrarian fund is a veritable pharmacy. Its shelves are stocked with the likes of Merck, Barr Pharmaceuticals ( BRL), Wyeth ( WYE) and other well-known -- and well-worn -- names.

Making the wide variety of drug stocks even more impressive is the fact that the fund is sector-neutral to the Russell 3000 Index, which means its health care stake only makes up around 15% of the portfolio. Co-manager Rob Weller says he is finding a plethora of pharma stocks to choose from as of late because so many are meeting his investing criteria of three years of declining sales growth, and price momentum.

The theory behind the fund, says Weller, is that a company's board of directors will oust management after three straight years of dismal performance, allowing new executives the opportunity to turn things around. The fund managers also wait for Wall Street to get on board by raising estimates and becoming more positive on the company's shares.

And a cheap P/E multiple doesn't hurt either, says Weller, who currently ranks King Pharmaceuticals ( KG), at 16 times 2006 earnings, and Cigna ( CI), with a 14 forward P/E, among his top picks. Weller says the Intrepid Contrarian fund, which has been around since early 2003, is up 23% annually since inception and just over 5% year to date.

Aside from pharmaceuticals, telecom remains a favorite sector among the contrarian set. Value investor James McGlynn, portfolio manager for the $67 million ( SAEVX) Summit Everest fund, for example, has stakes in Verizon ( VZ), BellSouth ( BLS) and SBC Communications ( SBC).

"These stocks were left for dead but they have dominant positions in the wireless market, which is far from dying," says McGlynn. "People treat them like they are going bankrupt, but in fact they are buying back stock and paying 5% yields."

McGlynn's fund is sector neutral to the Russell 1000 Value index, but he rotates between sub-sectors, which means he'll own telecoms instead of electric power generators, one of the market's hottest sectors recently, when it comes to his utility allotment.

McGlynn's latest contrarian play has been buying shares of General Motors ( GM) after the United Auto Workers union agreed to a labor deal.

"The labor agreement is just the latest step," says McGlynn. "Eventually Kirk Kerkorian will get GMAC separated from GM, and its value will be worth more than the sum of its parts."

Notwithstanding the widely picked-over drug and telecom sectors, and a potential value trap like GM, most contrarian fund managers bemoan the lack of investable opportunities. Many are biding their time and sitting on cash instead.

"In my 40-year career, this is as tough as it's been to find bargains," says famed value investor Don Yacktman, portfolio manager of the $500 million ( YACKX) Yacktman fund.

Yacktman currently has more than 30% of his fund on the sidelines in cash, yet he may start putting some of that money to work in what he sees as an up-and-coming contrarian sector: consumer disposable stocks.

"Companies like Coca-Cola ( KO) and Kraft ( KFT) are getting squeezed now because commodity prices are going up and they have limited pricing power," says Yacktman. "But over time these companies will adjust to their environment by repricing their products."

"They are money machines that need a little oiling," says Yacktman.

To view a video take of Gregg Greenberg's mutual fund report, click here.

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