After reading an unbelievable sell recommendation by one of my BloggingStocks colleagues, I didn't know whether to laugh or cry. In Thirteen Dow stocks that are doomed, we are informed that 13 of the 30 are going down and we should all bail out before it is too late.

I find this silly on many levels. For one, 13 stocks amount to a large-cap index fund and since large-cap stocks have lagged the market the probability that they will outperform going forward is real and has many investors promoting them.

"The Dogs of the Dow strategy has a long-term history of outperforming the Dow Jones average," notes technical expert Gerald Appel.

In his Systems & Forecasts, he explains, "The theory is that the highest yielding stocks are undervalued and should have the greatest change of appreciating." Here, he reviews the five highest yielders.

"In calculating a formal track record for the strategy, dividend yields are ranked on the last trading day of each year. However, there is no reason why you are limited to ranking stocks only at the end of the year.

"The current market climate appears favorable for using this strategy to garner investment income, since market risk appears below normal and investment income is getting hard to come by.

Today's "Abreast of the Market" column in the Wall Street Journal explores the difficulties that many contrarian investors are facing this year: with a bull market and optimistic investors, there simply aren't that many hated stocks to be scooped up at bargain prices. Only four stocks in the Dow Jones Industrial Average are down this year, compared with 16 last year. The two most poorly performing industries of the year, health care and technology, are up 5.4% and 8.6% respectively. So how do contrarians find unloved stocks in a market where everything is up? Among the strategies highlighted in the article are:

• Buying the 50 most poorly performing stocks in the last year from the S&P 500. 2002's weakest were up an astounding 81% in 2003, but have performed the same or worse than the broader index every year since. One professor suggests buying the most poorly performing stocks of the past 3 to 5 years, because those have been "in the doghouse" for a long time, and are truly out of favor. He also suggests looking for signs of a rebound in the share price before buying.
• Buying stocks that have been removed from the S&P 500, and avoiding stocks that have been added. Being removed from an index is a pretty clear sign of negative investor sentiment, and companies that were removed from the S&P 500 this year are up, on average, 28%. Stocks that were added are up just 1%.
• The Dogs of the Dow, which consists of buying the five or ten highest yielding stocks in the Dow Jones Industrial Average, was popular for a long time. However Professor Mark Hirschey has studied it and found it to be no better than buying the entire index, and the system has fallen out of favor lately. Perhaps now that it's out of favor, the Dogs of the Dow Strategy is a contrarian play itself?

Investors interested in exploring contrarian investment strategies should pick up a copy of David Dreman's classic book Contrarian Investment Strategies.