Personal Finance

Winnipeg Free Press - PRINT EDITION

Know where to invest

Energy, metals expected to be strong in 2012

By: Lauren Krugel

Posted: 02/4/2012 1:00 AM | Comments: 0 (including replies)

CALGARY -- The new year isn't exactly getting off to a rosy start, with debt woes in Europe and economic uncertainty in the United States weighing on investors' minds, but experts say there might be some bright spots to look out for in 2012.

"People are scared, and rightfully so. It's been a tough time for many people, but it doesn't mean it will always be tough," said John Stephenson, portfolio manager at First Asset Investment Management in Toronto.

"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.

For instance, Stephenson expects some energy names 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 such as 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 euro zone 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."

-- The Canadian Press

Republished from the Winnipeg Free Press print edition February 4, 2012 B12

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