"We are growing more selective in the high-growth parts of the market, where we see more risk due to elevated valuations," Danoff said in a commentary letter for the second quarter.

Contrafund said it continued to trim its position in discount retailer TJX Cos. Inc. on valuation concerns, but remained overweight in the stock.

But overall, Danoff remained positive about the stock market.

"We feel historically low interest rates and inflation, along with expected modest earnings growth, should serve as tailwinds for stocks," according to his letter.

Meanwhile, Danoff said Facebook Inc remained one of Contrafund's largest overweight positions, as he sees more opportunity for the social media giant to monetize its massive user base.

Information technology stocks continued to account for the largest portion of Contrafund, mostly because of Danoff's positive view of the enterprise software industry.

In particular, Danoff said corporations are rapidly adopting the software-as-a-service (SaaS) model, where they effectively rent the latest software.

"While valuations for some SaaS providers are high, we are confident in the risk-adjusted return potential for our holdings in the group," Danoff said in the letter.

Contrafund posted a return of 3.90 percent in the second quarter, lagging the S&P 500 Index's 5.23 percent advance for that period.