In many ways the global economy has crossed into uncharted territory. The US economy, long the engine of global economic growth, continues to experience anemic growth, and bickering in Washington led ratings agency Standard and Poor’s to downgrade US credit for the first time in history. Europe’s troubles are well-known to any market watcher and inflation looms large in emerging markets.

But Pat Dunkerley, lead portfolio manager for Scout Mid Cap (UMBMX), believes that investors must distinguish between broad economic woes and the state of the market, which can make counterintuitive moves. Furthermore, any favorable economic news could have an outsized impact on battered markets.

“There’s been a lot of bad news piled on the markets in the last 30 days. But the market turmoil and the downgrade of US debt have woken up the authorities, even in Europe,” Dunkerley said. “We believe the news flow from here will likely look better.”

Dunkerley noted the fund had adopted a cautious stance since the second quarter of the year, but that management is now “cautiously positive” about the US market.

Scout Mid Cap’s track record suggests that Dunkerley and his team have a knack for correctly reading the market’s tea leaves. After recording a 35.1 percent loss in 2008—a performance that still outshined its category—Scout Mid Cap skyrocketed by 47.2 percent the next year, topping its category by more than 10 percent and the S&P 500 by nearly 20 percent. The fund returned 27.9 percent in 2010, compared to a 15 percent gain for the S&P 500. As of the end of July, 2011, the fund had posted a gain of 7.4 percent, more than doubling the category’s average return. The fund’s trailing three-year performance ranks in the top 1 percent of Morningstar’s Mid-Cap Blend category

This performance is less a product of savvy market timing or broad economic calls, than a rigorous bottom-up analysis of quality companies.

Herbalife (NYSE: HLF) produces diet and nutrition products that are sold in more than 70 countries. This global footprint provides the company with exposure to developed and emerging markets, which are seen as the Herbalife’s next growth frontier. As of the second quarter, Herbalife’s volume point sales—an internal measure of growth—in emerging markets grew by 22.2 percent to 507.4 million, while sales in developed markets grew by 12.2 percent year over year to 473.1 million.

The company has also embarked on a novel merchandising strategy dubbed “nutrition clubs” that has helped spur sales growth. Rather than pay a single monthly check for Herbalife’s products, consumers now check in with support groups on a daily basis. This business model allows dieters to make smaller, regular purchases, which increases the company’s addressable market and boosts customer retention.

Scout Mid Cap in 2009 established a position in auto-parts supplier AutoZone (NYSE: AZO), which management believes will benefit from an aging US auto fleet. This firm has a retail presence of over 4,300 stores in the US, 230 stores in Mexico, and a nominal presence in the potentially high-growth market of Brazil. The firm boasts higher margins than its competitors, strong sales on a per-square-foot basis and a reputable private-label brand.

Autozone’s management has also aggressively repurchased shares. As of May 2011, the company had reduced the number of shares in circulation by about 13 percent to 41.4 million in the span of one year. The reduction of shares helped drive a 28.5 percent year over year gain in the company’s earnings per share (EPS) in the fiscal third quarter ended May 7, 2011. Net income rose 12.1 percent year over year to $24.6 million. It was the 19th consecutive quarter of double-digit earnings growth and the 10th straight quarter of EPS growth of more than 20 percent.

Dunkerley acknowledges that the global economy remains in a fragile state, but he doesn’t believe a second recession is imminent in the near term. The price of oil is on the decline, which should provide investors with extra cash for discretionary purchases. Short-term interest rates remain near zero, allowing businesses and consumers to borrow at favorable rates. It’s a mixed bag, to be sure, but investors are overly pessimistic.

“It’s time that investors become more positive and go bargain shopping,” Dunkerley said.