Asset Class Performance in 2011
The table below is a list of eleven ETFs representing various asset classes and international markets. It is ranked according to performance in 2011. What we see is that US Treasuries (TLT) led the pack with a 34% gain followed by Inflation Protected Bonds (TIP) with a 13% gain and Gold (GLD) with a 9.5% gain. No doubt these leading asset classes reflect a flight to safety, but at the same time it reflects confusion about whether to expect deflation (which would favour TLT) or inflation (which would favour TIP and GLD).
Next on the list is the Dow Jones Industrials (DIA) with an 8% gain, the S&P500 (SPY) with a 1.9% gain, and the Russell 2000 (IWM) with a 4.4% loss. This divergence among three US stock indices reflects a flight to the safety of large multinationals which are overweighted in the Dow Jones (as a price-weighted index, the largest components are IBM, Chevron, McDonalds, Caterpillar, and Exxon Mobil; all of which have market caps above 50 Billion). In contrast, investors shied away from smaller companies that make up the Russell 2000. In contrast, it's worth noting that small cap stocks led the way during the bull market of 2009-2010.
Finally, non-US indexes fell the most on the year. The Europe 350 Index (IEV), the MSCI Canada Index (EWC), Pacific ex-Japan (EPP), Japan (EWJ), and the Latin America 40 (ILF) all fell between 11 and 19%.
Sector Performance
The graph below shows the annual performance of nine sectors within the US stock market. At the top of the list are Utilities, which gained 13% and reflect a flight to safety and dividend yields. Next on the list is Healthcare, which has a demographic tailwind behind it. Services and Consumer Goods also managed to gain a few percentage points.
Technology was in the red, which is not a sign of a healthy market. At the bottom of the list we have the Financial sector with a 19% loss. Until the financial sector finds solid footing it will be difficult for a broad-based bull market to occur.
It is convenient to report the performance of an index like the Dow Jones because we can boil down a lot of information to a single number, such as the DIA gaining 8%, as I mentioned earlier. However, this hides important information about how the underlying stocks performed. As I've discussed in a previous post, most stocks underperform but a few outperform and spend many weeks making new all-time highs.
Dow Jones Components
The components of this index had an interesting performance distribution. The majority of stocks gained more than 2% and six stocks rose more than 20%, led by McDonalds (MCD) with a 35% gain. True to form, MCD spent many weeks on the ATH list this year. On the other hand, about 1/3 of the index fell more than 2% and three stocks fell more than 20%, the worst being Bank of America (BAC) which fell 58%.
Slightly less than half of the constituents were up on the year, which is consistent with the fact that the index finished flat. There were 12 stocks that lost more than 50% and 81 that lost between 20 and 50%. On the upside, 87 stocks gained between 20 and 50% and 10 gained more than 50%. The biggest winners were COG (Cabot Oil and Gas, +101%), EP (El Paso Corp, +94%), ISRG (Intuitive Surgical, +80%), MA (Master Card, +67%), BIIB (Biogen Idec, +64%). Here is a link to their charts. The biggest losers included NFLX, WFR, ANR, MWW, and FSLR. Most these losers were nowhere near their ATH (charts). The exception is Netflix which started the year by making All-Time Highs only to fall 61% in the latter half. This is a good reminder to always have a trailing stop!
In the small cap stocks we see a much wider distribution than we did for the established S&P500 components and the massive Dow components. In the first graph below I've grouped the performance into large bins which makes the graph more compact but distorts the appearance of the distribution. For that reason I included a second graph that shows just how long the right-side of the distribution is.
There are more losers than winners, as I've discussed before (most stocks lose money), but the winners make huge gains. This is why I pay attention to the stocks that are making gains and are near their ATH. The top five winners this year were GLNG, INHX, MDVN, QCOR, and VRUS. Of these, only Golar LNG (GLNG) is not in the biotech area. Looking at their charts we see that only QCOR and GLNG made the majority of their gains in a trending fashion whereas the others had huge gaps.
Looking ahead to 2012 patience and persistence are key words that come to mind. My plan is to keep an eye on Weinstein's indicators while watching for stocks that are beating the market and stalking them for a low risk entry point when the market presents an uptrending opportunity.
On an administrative note, in 2012 I will update my stock screen results every weekend. Blog posts will be intermittent as I make them when time permits and as interesting observations arise.
There are decades where nothing happens;
and there are weeks where decades happen.
– Lenin
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Related Posts
- The Priority List
- Full All-Time High List
- Is this a bull or a bear?
- Listen to Price Action
- Why all-time highs outperform
- Van Tharp on Stalking Your Next Trade
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