How our sector tips played out in 2009

Thank you Mervyn King. Thank you Ben Bernanke. You’ve both made my job a lot easier this year. If it wasn’t for all the dodgy assets that central banks took off banks’ balance sheets, and all the electronic cash they pumped into the system, we might never have witnessed the knee-jerk super-rally that has seen stocks surge over the past 12 months.

This time last year, we were just trying to find any stocks that could survive the turmoil. We thought three industries would hold up well: nuclear power, forestry and waste. And they did. Our forestry tip, China’s Sino-Forest (TSX: TRE), is up 93% in the past 12 months. Waste giant Republic Services (NYSE: RSG) has motored along steadily, rising 23%.

With nuclear power the new green energy of choice, uranium miner Cameco (TSX: CCO) rose 97%. However, our raw material tip, Uranium Participation Corporation (TSX: U), only gained 4%, as the uranium price was held back by concerns that bust US bank Lehman Brothers might release a stockpile of the metal onto the market.

It was also a great year for medical breakthroughs. As Barack Obama lifted the US ban on stem cell research, related stocks rocketed. We waited for the excitement to fade, then tipped adult stem cell group Reneuron (Aim: RENE). It’s up 25% since July.

A potentially grave medical crisis caused by a shortage of the nuclear isotopes used in imaging and radiotherapy prompted Washington to intervene again. One beneficiary has been Advanced Medical Isotope (OTC: ADMD), a leading contender for emergency funding under a new isotope bill announced last month. It’s up 56% since we tipped it in July.

Cloud computing also caught investors’ imaginations. The idea that vast server farms in abandoned warehouses would drive the economy of the future lifted data storage group NetApp (Nasdaq: NTAP). Between tipping it in February and selling in July, the stock rose 66%. We also squeezed 44% out of networking software group Soapstone Networks (OTC: SOAP) before selling in April.

There was also good money in identifying bottlenecks in the energy supply. As the tankers storing oil backed up in ports, onshore storage group Vopak (Amsterdam: VPK) rose 63%. Many energy infrastructure and pipeline projects in the Middle East boosted engineer Kentz Corporation (LSE: KENZ), up 51% since we tipped it in May.

The drugs business was bound to hold up irrespective of King and Bernanke’s efforts. Generic drugs producer Mylan (Nasdaq: MYL) rose 55% before we took profits earlier in the year. Drugs researcher Covance (NYSE: CVD) climbed 53% between our buy and sell tips. Distributor CVS Caremark (NYSE: CVS) rose 28%.

But the biggest story was China. As commodity prices tumbled, Beijing went on a spending spree. State oil groups and sovereign wealth funds raced from Alberta to Australia to find the raw materials China required. The most dramatic gains came from rare earth metals group Lynas Corp (ASX: LYC). We managed to tip the stock shortly before Chinese state-owned China Non-Ferrous Metals bid for a large stake in the miner. Thankfully we sold before the deal was scuppered by the Australian government – pocketing a 143% profit.

Any firm selling anything China needs had a good year. Potash demand saw Potash Corp (NYSE: POT) rise 85%. It’s still worth holding. Coal shipments from Australia boosted Anglo Pacific (LSE: APF) by 57% between our buy tip in May and taking profits last month. US coal producer Peabody (NYSE: BTU) is up 63% since May. Chinese demand for methanol to run its bus fleets lifted Methanex (Nasdaq: MEOH) by 78% and its appetite for pork has pushed Zhongpin (Nasdaq: HOGS) up 33% since we tipped it in February.

The one major dud was medical insurance group American Physicians Capital (Nasdaq: ACAP), down 40% since I tipped it in February. After last year’s worst tip, Advocat (Nasdaq: AVCA), still down 30% since I tipped it in February 2008, I’m steering clear of US healthcare services for the elderly.

Take profits for Christmas

The stockmarket rally, which looked long in the tooth five months ago, is starting to flag. For peace of mind this Christmas, I’d suggest taking profits where we’ve made them and sticking with some dependable defensives we tipped this year.

Brazilian utility CPFL Energia (NYSE: CPL) has had a stellar year, up 62% since March. It still yields 6.5%, but now is a good time to cash out. I’d stick with telecoms group Verizon (NYSE: VZ), yielding 6.2% and tobacco giant Altria (NYSE: MO) on 8%. Neither will be budged from their dominant positions in their respective industries. But both have been left behind in the rally, with Altria up 18% and Verizon up just 8% since tipped.