The Key To Outperformance

By Arne Alsin: This is the tenth piece in Seeking Alpha's Positioning for 2013 series. This year we have taken a slightly different approach, asking experts on a range of different asset classes and investing strategies to offer their vision for the coming year and beyond. As always, the focus is on an overall approach to portfolio construction.

James Picerno submits: If you could only make one decision in your investment strategy, what would it be? Would you concentrate on picking the best securities? The best ETFs or mutual funds? Would you focus exclusively on trying to time your asset allocation/rebalancing choices? Or maybe you'd spend a lot of time deciding if Asian stocks would beat European equities in the foreseeable future. Or how about managing the risk, however defined, like a hawk?

“I spoke with a professional whom I consider one of the best in the business, a friend I’ll call Bob (even though his real name is Rich). Bob is in charge of $12 billion of U.S. equity funds at a major investment firm.

In volatile markets, small stocks typically lag larger companies as investors flee what they perceive to be risk. However, this love affair with large-caps is generally short lived as investors return to the beaten-up small caps when the turmoil subsides.

In volatile markets, small stocks typically lag larger companies as investors flee what they perceive to be risk. However, this love affair with large-caps is generally short lived as investors return to the beaten-up small caps when the turmoil subsides. Historically, small-caps have outperformed their larger counterparts. In 2011, junior miners were shunned, but Global Resources Fund (PSPFX) co-portfolio managers Evan Smith and Brian Hicks pointed out to me this week that we’re beginning to see signs of small-cap strength.

By Arne Alsin:In David Weidner's column in The Wall Street Journal last month, "2012 Was Good for Stocks, Bad for Stock Pundits," he said that the "median accuracy for market calls" by pundits was 47%. "The record speaks for itself," Weidner said. "Most of the smartest guys in the room are usually about as reliable as a coin flip."

By Henry Stokman:Throughout 2010 and 2011 Mortgage REITs, especially Annaly Capital (NLY), performed extremely well compared to stocks in the broader market. The company's larger than life dividends and steadily increasing performance has drawn a lot of attention to this sector. One of the main reasons for the outperformance that has been seen in this sector is due to the low interest rate environment that we are currently in.

By Insider Monkey: The medical industry includes medical and nursing Services, medical and dental instruments, medical electronics, and medical specialties. Investing in medical companies can be very lucrative if investors can pick the right stocks. The long-term trend in the industry is still positive despite the recent regulations. We believe one of the best ways of picking good stocks in this sector is focusing on top hedge funds’ positions.