Fighting trends in the market without solid reasoning is a good way to go broke quickly. But the contrarian strategy of buying at the bottom and selling at the top has earned huge sums of money for master investors such as George Soros and John Templeton.

They’ve made uncannily accurate market calls by going against popular opinion. Inspired by their wildly profitable investing strategies, I did some research and uncovered what may be the boldest contrarian investment of the decade. 

#-ad_banner-#But first, I should point out that it takes a contrary statement to explain contrarian investing: Despite popular belief, this strategy isn’t simply going against the crowd for the sake of challenging the status quo. Soros and Templeton, for example, use careful research to support their contrarian positions before they risk even one dollar on an investing idea. 

This contrarian attitude allows investors to see the subtle signs that a market move is overextended or the first glimmer of hope when everyone has given up on an economy, stock or market. They can see when the bull market exuberance is truly irrational, enabling shorting at the highs or buying near the lows.

This approach led me to an economically struggling nation that most investors have dismissed as having any potential for a turnaround. 

I can’t blame them. 

After all, years of depression, out-of-control debt loads, riots and two bailouts from the International Monetary Fund that didn’t seem to accomplish much have turned this beautiful island nation into a pariah of the global economy. But I say it’s time to invest in the nation that nearly bankrupted the entire European Union: Greece. 

Looking at the facts, the worst is over for Greece. The country has started its long climb back up the steps to respect.

This provides the perfect environment for risk-embracing, contrarian investors to enter long-term investments with strong potential for profits. 

It’s important to remember, however, that changes will be slow and hard-won in this beat-down country. Regardless of the data’s slight ticks higher, 30% of Greece’s labor force remains unemployed, while 52% of its young people have not been able to find work. Times are still dire, and I am not saying things are back to normal in Greece. However, I strongly believe we are witnessing the first glimmers of improvement. 

Here’s why…

One of the first harbingers of economic stabilization is that the canaries in a coal mine are saying the bond market has improved. Greece’s 10-year benchmark borrowing costs are one-third of what they were in May 2012 at 10.6% and have been fairly stable since the first of this year.  This is because the European Central Bank is accepting bonds guaranteed by Greece as collateral for its monetary operations. This is a huge first step as the nation lifts itself from the floor.

And the latest gross domestic product numbers indicate the Greek economy contracted at 5.7% in the fourth quarter of 2012, beating analyst‘s estimates and 2011’s 6% contraction during the fourth quarter. I know this is just a fraction of improvement, but any improvement is a step in the right direction.

In addition, the government under former Prime Minister George Papandreou experienced much difficulty in following IMF bailout requirements and targets. But the new government led by Antonis Samaras has successfully met or even beaten the requirements. To gain the votes needed to maintain adherence to the bailout rules, Samaras has built a coalition of centrist parties from the right and left that are decidedly supportive of the European Union. 

As you likely know, this adherence to the IMF’s bailout rules means austerity for the nation. No one said this reversal of misfortune was going to be easy, but at least we now know that Greece will likely not be leaving the euro zone. This means the formidable powers of the European Central Bank and IMF still can be expected to do whatever it takes to get Greece’s economy back on track.

Sensing a positive turn, the Greek stock market has rallied by more than 82% since June 2012. 

In addition, Standard & Poor’s increased the country’s sovereign credit rating to “B” with a stable outlook — up from a “selective default” rating just four months ago. These are all glimmers of hope in Greece’s very negative economic environment.

How can contrarian investors best capitalize on the brewing Greek turnaround?

I think investing in individual stocks like the National Bank of Greece (NYSE: NBG) is simply too risky at this stage of the game. While there may be large profits for those investors willing take the risk on individual stocks, the downside currently outweighs the upside potential.

Investors need to invest into the economy as a whole so that the sectors that are firing on all cylinders balance the laggards. The way things are right now, it is difficult to determine which sectors will remain profitable and when the slow starters will finally roll over into profitability.

This is why a diversified instrument like Global X FTSE Greece 20 ETF (NYSE: GREK) fits the bill. This exchange-traded fund (ETF) holds 20% financials, 22% consumer goods, 14% telecommunications, 13% consumer services and 12% industrials as its top holdings. It is down slightly on the year, because of a downgrade to emerging-market status by Russell Investments. This pullback sets up a perfect time for savvy contrarian investors to start to build a position in Greece.

Risks to Consider: There is no question that Greece remains extremely risky. However, it is within this high-risk level that I see opportunity. The Greek stock market is rallying, but the question is, will there be another unforeseen bump in the road? You should always use stops and position size properly when investing, and this is particularly true in speculative contrarian ideas.

Action to Take –> GREK is trading above its 200-day moving average but has fallen lower during the last 30 days, and has just bounced from support. This sets up an ideal time to begin accumulating shares. Buying now makes sense with stops set at $16 and a 100%, 24-month return target at $34.