Mutual Fund Picks for 2014 and The Best ETFs for 2014
AlphaProfit Provides New Fund Picks
The AlphaProfit Core and Focus model portfolios are reconstituted to include new mutual fund picks for 2014 and the best ETFs for 2014.
U. S. stocks had banner year in 2013.
The Fidelity Spartan 500 Index Fund (FUSEX) that tracks the popular S&P 500 index ($SPX) was up 32.3% for the year as the benchmark recorded its largest annual gain since 1997.
Developed markets abroad also saw sizeable gains. The Fidelity Spartan International Index Fund (FSIIX) that tracks the MSCI EAFE developed market stock index advanced 21.7%.
Emerging markets lagged. Vanguard ETF (VWO) that invests in emerging markets lost 4.9%.
Commenting on global stock markets, Dr. Sam Subramanian, Editor of the AlphaProfit Premium Service Investment Newsletter said, 'While investors had plenty of issues to fret about such as bond purchase tapering, fiscal cliff, and government shutdown to name a few, asset purchases made by the Federal Reserve & the Bank of Japan played a key role in supporting the global economy in 2013 and helped to add nearly $9.5 trillion to the market value of world stocks.'
From a sector perspective, interest rate sensitive sectors generally lagged as the yield on the 10-year Treasury bond rose 127 basis points through the year to end at 3.03%. The Utilities Select Sector SPDR ETF was the weakest performing Select Sector SPDR ETF advancing 13.1%.
Gold stocks continued their underperformance from 2012. The Market Vectors Gold Miners ETF (GDX) that invests in gold stocks was down a whopping 54.0% and the price of the yellow metal as tracked by SPDR Gold Shares ETF (GLD) declined 28.3%.
Consumer Discretionary Select Sector SPDR ETF (XLY) was the best performing Select Sector SPDR ETF advancing 42.7%. Improvement in the job market, rise in home prices, and range-bound commodity prices provided a tailwind for consumer discretionary investments.
Specific industries from certain sectors fared notably well. Biotechnology in the healthcare sector, software in the information technology sector, transportation in the industrial sector, and capital markets in the financial sector were standouts.
Among Fidelity sector funds, Fidelity Select Biotechnology (FBIOX), Fidelity Select Software & Computer Services (FSCSX), and Fidelity Select Air Transportation Portfolio (FSAIX) with gains of 65.7%, 51.2%, and 50.7%, respectively turned out to be among the best mutual funds picks for 2013.
Likewise, iShares US Broker-Dealers (IAI), Market Vectors Biotech (BBH) and Global X Social Media Index (SOCL) with gains of 65.7%, 65.5% and 64.0%, respectively were among the best ETFs for 2013.
In 2013, the AlphaProfit Fidelity and ETF model portfolios provided to Premium Service subscribers included top performing mutual funds and best ETFs in biotechnology, capital markets, and software industries.
These timely selections enabled the AlphaProfit Fidelity and ETF model portfolios to gain between 37.3% and 47.1% in 2013 and outperform the S&P 500.
Compounding at an annual rate of 21.1%, a dollar invested in AlphaProfit's selection process in 1994 is now worth $46.39 while a comparable investment in the S&P 500 is worth just $5.84.
Consistent selection of winning mutual fund picks has enabled AlphaProfit's Premium Service to rank #1 in Hulbert Financial's investment newsletter rankings multiple times.
Mutual Fund Picks for 2014 and the Best ETFs for 2014
Investors enjoyed a relatively smooth ride in stocks through 2013. Price volatility as measured by the Chicago Board Options Exchange Volatility Index ($VIX) declined 24% during the year.
Stocks avoided a 10% decline through 2013. They have now rallied for 26 months without such a decline, the longest winning stretch since 2007.
While stock prices have rallied handily to reward investors, the growth in corporate earnings has not been nearly as impressive. S&P 500 member companies are on track to grow earnings 4.7% in 2013.
Most of the advance in stock prices has resulted from an expansion in the P/E multiple rather than growth in per-share earnings.
Dr. Subramanian says, 'Higher valuation metrics reflect optimistic expectations for corporate earnings growth. This in conjunction with a technically mature rally can cause stock prices to decline 10% at any point.'
He expects economic data in conjunction with Federal Reserve policy changes to be major drivers of stock price volatility in 2014.
'The Federal Reserve would ideally like to gradually bring its stimulus program to a close as the economy strengthens and confirms its ability to continue growing without life support. However, economic data may cooperate to the extent needed. This in turn is likely to increase volatility in stock prices', cautions Dr. Subramanian.
The rising tide in 2013 lifted essentially all boats. Nearly, 460 of the S&P 500 stocks rose helping all of the 10 major sectors to gain.
Analysts now expect S&P 500 company earnings to increase 10.5% in 2014 with revenue growing 4.5%. With fourth quarter 2013 earnings reports due soon, 2014 expectations are over double what is likely to be achieved in 2013.
The combination of higher growth expectations and valuation can make stocks in certain groups more vulnerable to disappointments than others and make the advance in stock prices more selective in 2014.
A smart strategy is to keep an eye on valuation while seeking growth. This is precisely what AlphaProfit's time-tested ValuM investment process does by judiciously blending fundamental and technical analyses to consistently choose the best Fidelity Select funds and the best sector ETFs.
Subscribers to AlphaProfit's Premium Service investment newsletter get timely recommendations on best mutual funds, ETFs, and stocks.
The AlphaProfit's Core and Focus model portfolios are repositioned with new mutual fund picks for 2014 and the best ETFs for 2014.
'Even though downside risks for stocks have increased in 2014, they are likely to perform better than bonds and cash as they did in 2013. We look forward to provide the best mutual fund picks for 2014 and the best ETFs for 2014. We also intend to provide timely asset allocation advice to help subscribers position their investments for protection of gains before markets turn south and for growth before markets turn north', concluded Dr. Subramanian.
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AlphaProfit Investments, LLC is an independent investment research firm based in Sugar Land, TX. AlphaProfit publishes the AlphaProfit Sector
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