By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Winning the battle but losing the war?
One year ago in this space, I reported that the top performing advisers were predicting that inflation in 2011 would emerge victorious in its epic battle with deflation. (Read my column in the January 2011 edition of Trading Strategies, entitled “Betting on inflation.”)
They would appear to have been at least partially right. A year ago, the Consumer Price Index’s 12-month rate of change stood at just 1.1%. The comparable rate today is 3.4%, three times greater.

Primary concerns
Sorting the winners from the losers on January's investment ballot.
• Hulbert: January has a surprise in store
• Neiman: Elections and elected will move stocks
• Springer: 2012 brings more politics, more debt
• Morales & Kacher: What is gold telling us?
• Inflation hedges don't always pay off
• Lowell: There's no place like home
Gold, Commodities Poised to Rise
Michael Cuggino, manager of the Permanent Portfolio Fund, tells Jonathan Burton that investors in 2012 will boost prices of gold, copper and other commodities.
Nevertheless, if this was a victory, it has to be considered a Pyrrhic one: The three mutual funds that this group of top performers found popular a year ago have each lost ground. Two of the three were gold funds and the third was a bet on higher Treasury bond yields. This latter one in particular was a big loser, losing nearly 30% of its value during 2011.
What are these top performers recommending today? To find out, I constructed a subset of those advisers on the Hulbert Financial Digest’s monitored list who today satisfy the same criteria I used a year ago: Having beaten a buy-and-hold strategy in the stock market over the last decade, and as well among the top 25% for performance over the last 12 months.
The list of mutual funds that these top performers currently like is far different than a year ago. Today there are no gold funds, nor any direct bets on higher Treasury yields. Note carefully, however, that they aren’t betting on outright deflation, either—at least in any aggressive way: The bond funds that they currently like have relatively short durations.
Indeed, it would appear that, unlike a year ago, they are hedging their bets.
The funds are listed in descending order of their popularity among the group of top performers that I constructed:
—Vanguard High Yield Corporate /zigman2/quotes/201549316/realtime VWEHX +0.19%
—Vanguard Short Term Investment Grade /zigman2/quotes/200545654/realtime VFSTX -0.10%
—Fidelity Select Natural Gas /zigman2/quotes/201887980/realtime FSNGX -4.26%
—Vanguard Intermediate Term Investment Grade /zigman2/quotes/201002642/realtime VFICX -0.12%
—Vanguard Inflation Protected Securities /zigman2/quotes/207983017/realtime VIPSX -0.16%
Click here to learn more about the Hulbert Financial Digest.