A reverse fund that outperformed 97% of its peers is betting on medical stocks, expecting this sector to turn things around.

A reverse fund that has beaten 97% of its competitors has been consistently buying medical stocks, betting that this underperforming sector will turn around this year. MFS Meridian Funds - Contrarian Value Fund bought shares of Thermo Fisher Scientific and Becton Dickinson in early summer, believing that their valuations were too low. As of August, healthcare stocks accounted for 12% of the fund's 2.7 billion portfolio, up from 6.9% at the beginning of the year. "Whether it's medical technology companies or large pharmaceutical companies, they are facing cyclical and regulatory issues," fund manager Anne Christine Farstad said. "For these stocks, this is a unique period of various challenges."