Surprise: Your portfolio may have some winners this year

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It was possible to make money in the quarter that ended Tuesday -- even in some corners of the stock market.

That’s a vast improvement from the fourth quarter, when every equity sector was bashed as the economy crumbled.

Many investors also are likely to find other pockets of green in their portfolios in the first quarter, which may help restore some faith in the concept of diversification.

Not to sugarcoat what happened to the stock market overall in the last three months: The Standard & Poor’s 500 index recorded its sixth straight quarterly loss, tying the last such streak, which ran from the first quarter of 1969 through mid-1970.

But the 1969-’70 sell-off hacked 30% off the S&P 500; this time around, the index is down a devastating 48% in six quarters.

In the last three weeks some semblance of hope has returned to Wall Street: The S&P 500 has shot up 17.9% since March 9, amid some tentative signs that the recession could be bottoming.

The market’s rebound trimmed the first-quarter net loss in the S&P to 11.7%. The Dow Jones industrial average fell 13.3% in the three months and the average New York Stock Exchange issue lost 13.5%.

So who made money in what was still a miserable period for stocks overall? Here are some of the first-quarter winners:

--- Technology stocks: The Nasdaq computer stock index, which comprises 458 issues from Apple Inc. to Zoran Corp., gained 4.8% in the quarter. And strength in tech names helped limit the Nasdaq composite index’s loss for the period to 3.1%, about one-fourth of what the S&P 500 lost.

The tech sector is a classic bet on growth, so the stocks’ relative strength suggests investors are looking ahead to an economic recovery. Low debt levels at many tech firms also give nervous investors some comfort, as I noted in this post last week.

--- The BRIC emerging markets: The BRIC countries -- Brazil, Russia, India and China -- all posted gains in their main market indexes in the quarter. Brazil was up 9%, Russia surged 25%, India edged up 0.6% and China jumped 30%.

As with tech, the strength in the BRIC markets can be viewed as a sign of faith in an economic rebound. In China, the government’s economic-stimulus program has gotten a far better reception from investors compared with Wall Street’s reaction to the U.S. stimulus program.

A March snap-back in commodity prices, including oil, also helped boost stock markets in countries that are major raw-materials exporters -- particularly Russia.

The Ishares MSCI Emerging Markets exchange-traded fund, popular with many small investors, was down for the quarter, but just barely: It slipped 0.6% to $24.81 a share in the three months, after diving 27% in the fourth quarter.

--- Municipal bonds: Investors flocked back to muni issues in the first quarter, lured by rich tax-free yields after the bonds suffered heavy selling during the worst of the credit-market panic in the fourth quarter.

Mutual funds that focus on long-term California muni bonds were up about 5% in quarter, including interest income and capital appreciation, according to Morningstar Inc.

By contrast, the bond market winners of the fourth quarter -- U.S. Treasury issues -- were losers in the first quarter, as some investors bailed out in the face of record low yields. Mutual funds that own long-term U.S. government bonds sank 8% in the quarter, on average, as a rebound in market yields on the securities devalued older bonds.

--- Gold and gold-mining stocks: There’s a camp on Wall Street that believes (or should we say, fears) that all of the trillions of dollars the government is throwing into the economy and financial system, to stave off depression, will lead to significantly higher inflation down the road.

That concern lifted the price of gold $39 in the quarter, or 4.4%, to $922.60 an ounce Tuesday from $883.60 on Dec. 31. The metal traded as high as $1,005 in mid-February.

Gold-mining stocks performed much better than the metal itself. Precious-metals mutual funds, which mostly own mining stocks, rose an average of 9% in the quarter, according to Morningstar.

Inflation jitters also gave a boost to inflation-protected Treasury bonds, which are guaranteed to pay a return over time that exceeds the inflation rate. Mutual funds that own inflation-protected Treasuries were up about 4% in the quarter, on average, Morningstar said.

-- Tom Petruno