At the beginning of any new year, something feels intuitively right about stepping into the prior year's high-momentum stocks. It's a rarity, however, for sectors and industries to lead the market
two years in a row. In fact, one year's best performers tend be outright disappointments during the following 12 months. History has shown it's the extreme laggards
from one year that often end up becoming the next year's leaders, as oversold conditions reverse.
Take 2011 for instance. The top-performing sector last year was the utilities group, with a 20% gain. It was a complete turnaround from 2010, when its 7.3% loss made it the second-worst performing sector. Meanwhile, 2010's big winners were industrial stocks, with a 15% gain -- but in 2011, this sector lagged the overall market, losing about one percentage point. The point is nothing lasts forever, good or bad.
With this example as the backdrop, here are 2011's weakest performers , each of which is poised to be a big beneficiary of the role-reversing phenomenon.
2011 laggard industry No. 1:
The aluminum industry didn't enjoy 2011, watching its stocks fall an average of 42.3%. The trend didn't even hint at turnaround late in the year with the rest of the market either, meaning these names are still at fresh new lows. While it's tough to catch a falling knife, if a recovery is in the cards, then this could be the ideal time to step in.
Pick of the litter: Against the backdrop of bad news on Thursday, Jan. 5, it seems nearly impossible to like Alcoa (NYSE: AA). After all, the company announced that its fourth-quarter income would fall from $0.24 per share in the same period last year, to $0.01 this year. Some analysts are still calling for a net loss for the year . Given the stock's roughly 40% loss in the second half of 2011 though, the worst-case scenario may be more than baked into the share price.
Yes, aluminum prices have been in a downtrend, falling from $1.24 per pound in May of last year to December's lows of $0.87 per pound.