A year ago, AdvisorOne published Best 5 Investment Picks for 2012 after analysts reported that corporate earnings were at an all-time high and the smart money was positioning investments for growth in 2012.
Data provided by top investment strategists at MFS Investments and ING Investment called for investors to put their money in:
- Technology Sector
- Mid-Cap Stocks
- Dividend-Paying Stocks
- High-Yield Credit
- Emerging Markets
So how did the investment predictions do?
Like much of the market, they certainly got it right in the first half of 2012, suffered through a lousy June, then saw a mixed performance for the rest of the year. But overall, the MFS and ING experts didn’t do too badly. Check out the following results, where we compare the experts’ picks against the performance of a number of highly traded exchange traded funds (ETFs).
The suggestion that Apple (AAPL) may be a good stock to hold in what MFS' Jim Swanson calls the "defensive" tech sector was a good one in November 2011, and a year later Apple is up an impressive 53.13%.
However, the stock has taken a beating this quarter since disappointment over the new iPhone5 and tough competition in the tech space has taken the polish off Apple’s reputation as a never-fail corporation.
From Oct. 1 to Nov. 30, the stock has dropped 11.24%. Still, many companies would be happy to trade their numbers for Apple’s: as of early December, the current share price for Apple is around $550, and there has been market speculation that the stock could take off next year. State Street’s SPDR ETF Technology Select Sector (XLK), which includes Apple, outperformed the Dow Jones industrial average over the last year, yielding approximately 13.5% versus the Dow’s 8%.
2. Mid-Cap Stocks
Accelerating corporate profits, “booming” U.S. manufacturing and underestimated consumer strength both at home and abroad were the elements that ING Chief Market Strategist Douglas Coté cited as reasons to buy mid-cap stocks in 2012. “Investors need to position themselves for when the rallies come,” Coté said a year ago.
He was correct about mid-caps, which did better than the broader stock market. A year-over-year comparison of the SPDR S&P MidCap 400 (MDY) versus the Dow shows both reaching similar peaks and troughs throughout 2012, although MDY generally outperformed. The MidCap ETF as of Nov. 30 was yielding about 13% compared with about 8% for the Dow. S&P MidCap ETF has its largest share of holdings, 21.64%, in financials, with companies like Raymond James Financial.
Swanson, chief investment strategist for MFS Investments, said last year that dividend payers like Duke Energy (DUK), were a “new defensive” sector. S&P 500 companies’ cash flows were experiencing a dramatically V-shaped profit recovery and clocking in at an all-time high, which promised dividends from quality stocks.
Swanson got it right. Take a look now at DUK’s performance, and the year-on-year charting of the stock’s performance shows a bumpy ride that put its 52-week range at anywhere from $59.63 to $71.13 per share. Still, 2012 was the 86th consecutive year that Duke Energy paid a quarterly cash dividend on its common stock.
4. High-Yield Credit
A year ago at this time, 2012 looked to be a good one for high-yield credit, according to Christine Hurtsellers, chief investment officer for fixed income at ING. She pointed to the fundamentals of high-yield corporate bonds, where low default rates were expected to continue, and she noted a preference for single B rated credits.
How did high-yield credit do in 2012? Looks like Hurtsellers spotted the right area of fixed income.
Performance of two widely bought bond ETFs, the iShares iBoxx $ High Yield Corporate Bd (HYG) and the SPDR Barclays Capital High Yield Bond (JNK), tracked each other extremely closely, with HYG’s year-to-date return as of Oct. 31 totaling 8.98% and JNK’s totaling an even higher 10.61%. Barclays Capital Bond fund has sizable holdings in companies like HCA Corp.
5. Emerging Markets Fixed Income
Emerging-market sovereign debt was poised to outperform in 2012, in Hurtsellers’ view, especially in Latin America given the demand for commodities. She also predicted a good year for “selected emerging-market corporates.”
That good year has come to pass for emerging-market sovereign debt.
A year later, a comparison of the iShares Barclays 7-10 Year Treasury (IEF) versus the PowerShares Emerging Markets Sovereign Debt Portfolio (PCY) shows PCY besting IEF significantly. The one-year performance of PCY totaled about 15% compared with the paltry 4% returns of IEF. PCY has big holdings in countries like Vietnam.
So for your 2013 investments, the overall takeout judging those Best 5 Investment Picks for 2012 is: If MFS and ING talk you might want to listen. Stay tuned for Best 5 Investment Picks for 2013 at AdvisorOne.
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