With stock markets on tenterhooks for more than a year now, being contrarian has rarely been easier.

Thomas Schuessler, who runs the roughly $1.33 billion DWS Large Cap Value Fund (KDCAX), invests up to 40% of the fund's assets in contrarian investments - stocks that are out of favor, turnaround candidates or companies undergoing corporate restructurings.

"There's quite a few (contrarian stocks) these days," said Schuessler, who manages the fund out of Frankfurt.

The fund invests mostly in common stocks and other equity of large U.S. companies. It's in various sectors, with energy, health-care and financial stocks among its top holdings, but Schuessler is also betting contrarian plays like offshore-drilling rig operator Ensco International Inc. (ESV) and insurer MetLife Inc. (MET), which are both trading below book value, pay dividends.

He said he mitigates the risks by focusing on companies with strong balance sheets.

In 2006 and 2007, he said there were virtually no contrarian opportunities. As a result, the fund was almost 100% invested in stable, value companies. But opportunities in out-of-favor stocks started to emerge last year, he said.

The energy sector is one area Schuessler is eying. He said he expects "quite a bit more" consolidation in this area, which has been hit hard by the collapse of oil prices.

The DJ US Integrated Oil and Gas Index, is down 36.46% from a year ago. Many energy companies are trading below book value, Schuessler said.

"Oil majors like Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) might take the opportunity to buy oil barrels," he said. The DWS Large Cap Value Fund owns shares in both of these companies. Marathon Oil Corp. (MRO), Anadarko Petroleum Corp. (APC) and Nexen Inc. (NXY) might be takeover targets, he said.

In the health-care market, insurer Wellpoint Inc. (WLP) is a strong contrarian pick, Schuessler said. It is trading about 28% off its August high. Pharmaceutical distributor McKesson Corp.'s (MCK) stock, currently 40% lower than its 52-week high, also has potential. McKesson has disappointed investors with lackluster earnings in recent quarters.

The three-star, Morningstar-rated fund has managed to beat the benchmark Standard & Poor's 500 index so far this year. The fund is down 1.22% for 2009, compared with the negative 6.32% return by the S&P. Over the last three years, the fund is down 0.31%, compared with a gain of 0.18% for the S&P.

The fund, like many of its peers, had its worst quarter in fourth quarter of 2008. "I was prepared for the impact of the financial crisis, but not a worldwide, deep recession," Schuessler said. In hindsight, Schuessler said he should have raised more cash before the market meltdown, but the fund needs to get companies valuations correct, not necessarily time the market.

Schuessler sees "more potholes" for investors but in the long run says investors should be hopeful.

"In three to five more years, the stock market will be substantially higher," he said.

-By Veronica Dagher; 201-938-5400; Veronica.Dagher@dowjones.com

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