Another form of investment, one that you will see associated with certain managed funds is "special situations" investing.

These types of funds (and investors) look for takeovers and turnarounds, unusually oversold and unpopular stocks, controversial or unusual stocks (such as an industrial stock that has just taken a beating because a major factory just blew up and killed people), lawsuits, investment trusts trading at a discount to assets, arbitrage situations, privatisations and companies battling an entrenched union/socialist government or otherwise that may make huge profits if they win.

So in other words, this type of investing chases high returns from potentially explosive stocks. Some of the highest returning stock plays of all time have come into this sort of investment banner. It isn't for everyone. It isn't particularly safe, but when it works it works very well. It is not unusual to find the fund right up the top of the rankings in any given year to be a special situations fund that has pulled off a fairly impressive coup.