Plenty of investment markets have recovered strongly over the past few years, with Japanese and US equities among those to bounce back from the global financial crisis that caused so much damage back in 2008.
A string of sectors, including retail and financial services, have improved considerably, while many under-pressure companies are in far better shape after successfully restructuring and attracting new customers.
But where does this leave the contrarian investor? With upside potential in so many previously unfavoured areas now more limited, where should those with a more adventurous streak look to put their money over the next few years?
What is a contrarian?
The first step is to define what constitutes a contrarian investor. For Geoff Penrice, a chartered financial planner at Astute Financial Management, it is someone who doesn't follow the general consensus, because they either disagree with the view or feel it has been exaggerated.
"Investors tend to have a herd mentality so particular assets, shares, funds and sectors become popular and then overpriced," he explains. "Once this is realised people sell and the price falls. A contrarian investor is using knowledge of this to improve returns."
Even advisers who prefer a passive style of investing – investing in funds that closely track particular markets – rather than active management, can see the attraction in adopting something of a contrarian stance.
One such person is Jason Witcombe, a director at Evolve Financial Planning. "One of the cornerstones of our investment philosophy is to regularly rebalance portfolios," he says. "What this means is systemising the process of selling high and buying low. In a way that's getting some of the fundamentals of contrarian investing into your portfolio."
Countries and regions
So many areas have risen in value over the past year that the only stand-out opportunity for contrarian investors is the emerging markets, according to Jeremy Tigue, manager of the Foreign & Colonial Investment Trust.
"They were so popular for so long from 2003 but fell much more than developed markets in 2008-09," he says. "You've had political stalemate in some of these countries, riots in Brazil, and the corporate progress of a lot of businesses has also been disappointing."
Elsewhere, there is little doubt that European economies are now recovering strongly but there are still opportunities for investors to make decent returns, suggests Ian Kelly, who manages European equity funds for Schroders.
"At the moment, Europe is actually a fairly contrarian play," he says. "Remaining concerns around the eurozone mean that European-listed global franchises are trading at a 30 to 50 per cent discount to similar US peers."
Commodity markets have been out of favour of late, in large part due to the same concerns over the pace of China's slowdown that have been affecting emerging markets, according to Jason Hollands, managing director of business development at Bestinvest.
"China's extraordinary growth over the last two decades and the emphasis on infrastructure projects has had a major impact on raw material prices and been a key driver behind the so-called commodity super-cycle," he explains. "A contrarian might take the view that markets have become overly bearish on China. A pick-up in global growth ahead of market expectations could spur a recovery in global commodity prices."
Andy Gadd, the head of research at Lighthouse Group, believes the global economic backdrop makes gold a potential candidate for the contrarian investor – particularly due to its qualities as a hedge against inflation.
He says: "We're in the middle of potentially the biggest economic experiment of all time, and for developed Western economies there are three ways to reduce the debt burden – grow out of it, inflate it away or reduce it through debt restructuring."
Following a strong run over recent years the price of gold retreated significantly in the first half of 2013 but has recently staged something of a comeback, he says, highlighting its advantages.
"There is no risk that a coupon or a redemption payment won't be made, a company will go out of business, or that savings will be lost through a saving institution's insolvency. Gold is also traded on a well developed metals market so has high levels of liquidity."
Ian Kelly at Schroders believes that "yesterday's heroes" of the US large-cap tech sector are being overlooked by investors, and warns that it is easy for the market to observe a change in the world and read too much into it. He cites the rise of the iPad.
"It's easy to over-extrapolate this to conclude that conventional PCs and desktop applications will disappear," he says. "We have to be careful to recognise genuine changes, but my guess is that in five to 10 years I will be sitting at a desk with multiple monitors on a computer which uses a powerful processor – either in the machine or in the cloud."
Matthew Jennings, an investment director in Fidelity's UK equities team, suggests telecoms and utilities as potentially lucrative areas for contrarians. "They are areas in which investors have really fallen out of love," he says. "Therefore, we've been able to find companies with interesting growth prospects or valuable assets the market has discounted."
He partly attributes the lack of enthusiasm for these areas to the fact they are viewed as pretty boring investments. "There's very little to get excited about with either of them," he admits. "They are capital-heavy industries which require high levels of investment."
For example, due to the heavily regulated nature of the industry, utilities are unlikely to blow the market away with high growth projections. "However, companies in which the market is not really interested are often the most attractive and rewarding investments because people aren't spending time getting to grips with the businesses," he says.
Mr Jennings cites the Kcom Group, the communications business, as a prime example of a telecoms stock with potential. "It's got a very strong competitive position and a secure and visible earnings stream," he says. "If things don't improve the company's shares shouldn't really go much lower because the market's expectations are quite low. However, if things do improve there's the potential for significant upside."
Ensuring the shares have an element of downside protection should be an important consideration for any contrarian investor, he points out. "Part of the attraction of a contrarian investment is that there should be less chance of losing money because the market has very low expectations around what the company can do," he explains.
Graham Spooner, an investment research analyst at The Share Centre, believes BHP Billiton, Tullow Oil and G4S are potentially interesting choices for the contrarian investor who is confident – and experienced – enough to buy individual stocks rather than investment funds.
"BHP Billiton has underperformed the index so far this year," Mr Spooner says. "However, compared with some in its peer group, it has fared better as a result of its diversification strategy and it pays a good dividend. We believe that in the longer term the company remains in a strong position to grow its profits as the global economy recovers."
Tullow Oil, meanwhile, has enjoyed a good success rate in recent years with its drilling operations, but a series of disappointing test results this year have hit the share price – although an oil find off the Norwegian coast in September helped restore confidence.
Last year was tough for G4S, with bad publicity surrounding the Olympics security fiasco. Its reputation took a hit and management changes were made. Its future success – or otherwise – will largely depend on its restructuring plans.
"Management describes this financial year as being one of consolidation for the group," Mr Spooner says. "In an unsettled world demand for security work is unlikely to diminish. The rating does not currently look overly expensive and the company previously had a good overall track record on building its position and growing operating profit."
Markets have certainly recovered from their lows but there are still exciting investment opportunities for those willing to back those that have been through – or which are currently enduring – tougher conditions.
In some ways it can be argued that the most contrarian call at the moment is to be cautious, suggests Jason Hollands at Bestinvest.
"A lot of optimism is priced into markets, whether it is belief that the UK economic recovery is gaining momentum or the argument that the US economy will accelerate on the back of the shale gas boom," he says. "US equities look expensive and arguably earnings have peaked due to the one-off benefits of refinancing when interest rates have been so low. A growth shock could see some of this optimism crumble."