Successful contrarian investors don’t abandon the basic tenets that guide good stock picking. They stick with high-quality companies – firms with strong balance sheets, solid business strategies and niches in their respective industries, and talented executives at the helm. Look for a catalyst for change, such as a new chief executive, a bold restructuring program or a new product about to launch. Avoid firms in declining industries, such as broadcast television, print media and coal, which face long-term, uphill challenges.

And prepare to be patient. Many contrarian investment theories take time to play out.

“We consider ourselves patient investors, but it’s easy to get stuck in value traps,” warns James England, manager of Meridian Contrarian fund. (Value trap is a term that describes a stock stuck in perpetual decline.) “Our best way to avoid that is to focus on earnings growth. We don’t invest unless we strongly believe that earnings can turn positive in the next year or two.”