If you can anticipate where the investing crowd will go next rather than simply follow the herd, your portfolio will perform a lot better. So when you're seeking attractive investments, looking back at past results can help you -- but not in the way that most people use them.

Looking at the rally
Overall, the stock market has seen some amazing gainsover the past six months. Although you could chalk up the initial bounce off the early March lows to relief that the financial system had avoided imminent collapse, the gains during the second and third quarters also incorporated a strengthening beliefthat the economy would improve and that businesses would begin to prosper again.

Yet some industries have recovered more strongly than others. Here's a comparison of how stocks in different industries have performed over the past six months:

Industry

2nd-Quarter Return

3rd-Quarter Return

Consumer Discretionary

18.2%

19.2%

Consumer Staples

10.1%

11.5%

Energy

13.4%

12.9%

Financial

35.8%

25.5%

Health Care

8.9%

9.5%

Industrial

19.3%

21.0%

Materials

16.9%

20.6%

Technology

16.8%

15.1%

Utilities

9.9%

6.1%

Source: Morningstar. Returns are for Select Sector SPDR ETF for each industry.

As you'd probably expect, financial stocks have soared as the immediate threatto their industry began to subside. Meanwhile, stocks in traditionally defensive industries, such as consumer staples and utilities, have held back during the rally, and health-care stocks have suffered as their industry has come under intense scrutiny as part of the debate over government health-care reform.

Is the obvious strategy the best one?
The obvious value strategy is to concentrate on the one or two worst-performing sectors and look for bargains among them. Several utility stocks look like great valuesright now, and companies such as Johnson & Johnson (NYSE: JNJ) are making the best of health-care bargainsby ramping up acquisitions, following in the footsteps of drug giants Merck (NYSE: MRK) and Pfizer (NYSE: PFE).

That strategy makes doing research a lot easier. If you think an entire industry is undervalued, you can keep things simple by buying a sector ETFthat invests in a wide range of industry stocks. Conversely, if you want to drill down further to identify the best individual stocks, it still gives you a way to focus your efforts so you don't have to do research on hundreds of different companies. Continued...