Some bright spots ahead for investors in 2012, portfolio managers say

“I think it’s just unfortunate that we’re in a situation where it has been such a struggle coming out of the gates.”

Investors are likely feeling “once burned, twice shy” after such a tumultuous 2011, but a little prudence and smart picking in 2012 may help savvy investors come out ahead.

Stephenson expects some energy names, for instance, to do well, especially if they focus on oil, which has been trading at a much more robust price than natural gas for some time now.

Copper and other base metals are also expected to be strong, and “gold will probably continue its winning streak in 2012,” Stephenson added.

Real estate investment trusts are expected to be a bright spot, though more so in the United States than in Canada, where they’ve already enjoyed a strong run in 2011, he said. REITS own properties like shopping malls, are taxed favourably and tend to have high yields.

Tim Caulfield, who co-manages the Bissett Canadian Equity Fund for Franklin Templeton Investments, said there are two ways to view investing in stocks.

“On one hand you have the more defensive sectors and interest-sensitive types of sectors, like consumer staples, telecom, utilities, which have held in well or even advanced nicely in 2011 and entering 2012,” he said, noting those businesses have benefited from low-interest rates.

On the other hand are cyclical businesses that are more sensitive to swings in the overall economy: energy, materials and consumer discretionary goods.

That doesn’t mean Caulfield’s fund is necessarily shying away from those sectors; the risk is often factored into those companies’ share prices, presenting good value for patient investors.

The key to those is focusing on quality, Caulfield said.

“These are businesses that can manage through more difficult environments and emerge from more difficult environments with their long-term growth and profitability profiles intact,” he said.

KCM Wealth Management portfolio manager Adrian Mastracci said he expects 2012 to be a volatile year, with so much uncertainty lingering in the Eurozone and the United States.

“We don’t think this year, 2012, is going to be a huge banner year,” he said from Vancouver.

That’s why Mastracci said investors should look to “quality steady income.”

“I want the large companies, hopefully those that have the probability of increasing the dividend,” he said.

“Therefore at the end of the year, my income intake will be a little better than at the beginning of the year.”

Mastracci doesn’t like to focus on which sectors are expected to perform better than others, but rather on putting together a well-balanced portfolio.

“We still expect a roller coaster on the various hot and cold sectors — things that are cold now will get warmer; things that are hot now will get colder,” said Mastracci.

That’s why diversification is crucial, he said.

“Hopefully you don’t want everything in the portfolio to be moving in the same way, unless that was up.”