Here's where the good guys are putting their money.
You won't be surprised to hear that 2011 was a rotten year for fund managers. The only thing they beat was the law of averages, with an incredible 67% undershooting their benchmark.
But amid all the fund manager flops, a handful did rise to the occasion. You won't be surprised to hear that one of them was Neil Woodford, who runs the massively popular Invesco-Perpetual Income and High Income.
Woodward isn't the only fund manager to deliver in 2011. So who else can stand proud, and more importantly, which stocks are they investing in now?
Woodford: the drugs do work
Woodford had a rough 2009 and 2010 after shunning overvalued banking and mining stocks, and his defensively-minded portfolio came good this year, as he knew it ultimately would.
His Income fund is up 9% over the past 12 months, while the FTSE All-Share is down 3%. I wish my portfolio had performed so respectively.
It's no secret that Woodford has gone big on pharmaceuticals, a good defensive stock in any recession, because when the monetary medicine isn't working, people need the real thing.
Just two companies, AstraZeneca (LSE: AZN) and GlaxoSmithKline (LSE: GSK), make up 16% of his portfolio. That's a big call for such a major fund. Swiss pharmaceuticals company Roche Holdings is also in his top 10. And right now, the drugs are working.
Woodford isn't all health and efficiency. He has his filthy but lucrative habits, primarily tobacco stocks.
Although his Income fund is 85% invested in the UK, it also contains a whiff of the US, in the shape of his third biggest holding, tobacco company Reynolds American (NYSE: RAI.US). Nobody gave up smoking because they lost their job, and that's why you will also find British American Tobacco (LSE: BATS) and Imperial Tobacco (LSE: IMT) in Woodford's top 10.
You probably don't need me to tell you that Woodford has a big stake in major UK blue chips such as Vodafone (LSE: VOD), BG Group (LSE: BG), BT Group (LSE: BT-A) and Reckitt Benckiser (LSE: RB). All big, solid, high-yielding defensive plays, exactly the type of stocks investors admire these days. Well, Woodford admired them first.
When the recovery finally comes and risk is on again, Woodford will no doubt fall behind. That won't worry him. It shouldn't worry you, either.
Anthony Cross: high energy returns
I have to admit that I knew very little about Anthony Cross of Liontrust Special Situations. But when you have just come first out of 296 funds in the IMA UK All Companies sector, people are prone to sit up and take notice.
Cross also came seventh out of 278 funds over three years, during which time he returned 109%, so this isn't just a flash in the pan. So how has Cross has been making his money?
His top holding is oil giant BP (LSE: BP) which has turned into a pretty nifty recovery play following the Deepwater drilling disaster. Over the last three months, it has risen from a low of 364p to 452p, a nice 24% increase for anybody who caught the bottom in September.
Cross is big on energy, with BG Group and Royal Dutch Shell (LSE: RDSB) his second and third biggest holdings, and pharmaceuticals, echoing Woodford in backing AstraZeneca and GSK.
International contract caterer Compass Group (LSE: CPG) and Unilever (LSE: ULVR) are also in the mixer, and I'm interested to see my top watchlist fave Weir Group (LSE: WEIR) right up there as well. I'm still hoping to find a nice entry price for this volatile Scottish-based turbine and pump maker, but I keep missing it.
I may be at cross purposes, Anthony isn't.
Paul Marriage: small but beautiful
UK smaller companies has been a tough sector to invest in over the past 12 months, falling more than 10%. That hasn't worried Paul Marriage, who runs Cazenove UK Smaller Companies, and has returned a solid 8%. And over three years, he has delivered a block-rocking 132%.
Now that's a Marriage made in heaven (sorry).
So how did he do it? His biggest holding is chemicals company Elementis (LSE: ELM), which has actually had a dismal six months, falling from a peak of £1.80p in July to £1.37 today. It on the mend now, after posting promising third-quarter results.
Marriage has also plighted his troth with Edinburgh-based logistics group John Menzies (LSE: MNZS), which is on course to lift its profits by 20% this year. Its airport ground handling business is going from strength to strength, winning contracts from Luton to South Africa.
Electrical equipment company XAAR (LSE: XAR) might also be worth a look. Third-quarter revenues and profits beat expectations, yet at 236p, it is still 20% down from its 12-month high.
Tomorrow is another year
Naturally, what works one year may flop the next. But these managers have proved themselves in a tough market, which is more than 67% of their rivals have done.
Do any of those stocks tickle you fancy?
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More from Harvey Jones:
> Harvey owns shares in BP, GSK, Shell and Vodafone. The Motley Fool owns shares in AstraZeneca, GSK, Unilever and Reckitt Benckiser.
