2012 Winners And Losers: Where To Look Next

As 2012 ends, it is time to look at the sectors that did the best. The best market performers went to the financial sector, up 27.65% and nearly double the return of the S&P 500 index. The sector benefited from a return of around 120% from Bank of America (BAC). At the start of last year, the company traded well below its book value, which is somewhere in the 20’s. A gloomy cloud that held back shares was its unknown liability in the mortgage market. Since then, housing prices improved in places like Phoenix (up 21.7%). Citigroup (C) shares were up around 54% in 2012.

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Consumer Discretionary rose 22.81% in the year. Companies like Comcast (CMCSA), Home Depot (HD), Amazon (AMZN), and Walt Disney (DIS) helped generate strong returns. Home Depot and Amazon surprised many: housing was assumed to be weak, which proved wrong. Amazon’s stratospheric high P/E failed to stop shares from rising nearly 50% in 2012.

The Health Care sector was up 16.74%. Companies like Pfizer (PFE) did well, while also paying dividends.

Only Utilities generated a negative return, but the chart may not have included dividend returns.

For companies on the S&P 500, EBAY (EBAY) outperformed the majority of technology stocks on the index. eBay closed recently at $53.59 and for 2012, shares were up 68.5%. Companies performing better than eBay were Expedia (EXPE), up 112 %, Seagate Technology (STX), up 85%, and Computer Sciences Corp. (CSC), up 69%.

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Markets were driven higher by another round of monetary easing in the last quarter of the year. Although China’s growth slowed, the region did not spark any panic selling in the markets. The economy in Europe continued to be weak, but politicians managed to convey solidarity amongst the countries. In 2013, investors should expect unlimited monetary easing to support the goal for growth at all costs. This will limit volatility (which hit another low at the time of writing) and the downside in markets.

The technology as a whole could perform well this year as easing policies support higher corporate spending.

Although energy underperformed in 2012, investors wanting to hedge against the risks of inflation might want to watch oil and gas companies. These companies include BP (BP) and Exxon Mobile (XOM). Many investors hold gold and gold miners to hedge against inflation, but gold is a better option. Investors should not expect a return to the gold standard, which will limit gold as an anti-inflationary position:

Written by Kapitall’s Chris Lau .