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What are we looking for?

Strategies with momentum.

More on today's screen

On Wednesday, we looked at Canadian stocks with momentum – in other words, with rising prices over the past few months.

Academic research has demonstrated that stocks that have surged in price tend to go on performing better than the market for another few months. A simple strategy of buying rising stocks often beats the market.

Some researchers contend this effect extends beyond individual stocks. For instance, in a 2009 paper called "Value and Momentum Everywhere," Clifford Asness, Tobias Moskowitz and Lasse Pedersen found that equity indexes, government bonds, currencies and commodities all demonstrate momentum tendencies.

Today, we'll look at strategies with momentum by examining the recent performance of a broad array of U.S.-listed exchange-traded funds (ETFs). These funds usually track an index or sector or country. By examining the ETFs with the best total returns since the start of the year, we hope to gain some insight into the strategies that have done best in the current market – and that may continue to do well over the next several months.

What we found

Two major themes: health care stocks and European stocks.

Out of the 20 ETFs listed on the New York Stock Exchange with the highest total returns year-to-date, 11 were plays on health care in some form, ranging from funds that focus on medical devices to ones that concentrate on pharmaceutical companies.

This stampede into the medical area may have been driven by investors searching for a haven from volatile markets and slow economic growth. Given aging populations and relatively low valuations in the health care sector, it's possible this trend could continue for a while.

European stocks also rewarded investors in the first few months of this year. Among the big winners were ETFs focusing on Spain, Germany and France, as well as European blue-chips. Despite Greece's debt crisis, investors appear to be seeing plenty of value in the more stable members of the euro zone.

Anyone tempted to ride the momentum wave should be aware that this strategy isn't foolproof. Markets can reverse direction without warning. But a look at the stocks or strategies with the greatest current momentum can be a good starting place for your own research.

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