Investment opportunities in China are shifting away from commodity-driven themes to the domestic consumption space, which is set for sustainable growth as the country undergoes a rebalancing of its expectations in its GDP and fixed-asset investments, says Eric A. Brock, a Partner and Research Director for Clough Capital Partners, L.P.

“So in 2012, we are starting to see leading indicators in China improve in terms of growth. Credit growth is bottoming, and consumption remains fairly robust with retail sales growing around 15% or so,” he said. “We just couldn’t be more constructive on opportunities in the consumer sector.”

Brock likes Vinda International Holdings Limited (3331.HK), a leading tissue paper company in China, because as incomes grow, tissue paper, such as toilet paper and paper towels, is going to become less of a luxury. He says Vinda is building its brand in the early stage of market development, and he sees the company growing its earnings 50% year over year for 2012 and 2013, with the shares now having a p/e ratio of about 19 times.

“According to its CFO, Vinda saw high 20% level growth in the first quarter as compared to last year, and we think that’s a level that can be maintained over the next couple of years. And this is really a market penetration story; the company is now getting scale and developing a brand image, which is very important,” Brock said.

Interoperability within electronic medical record systems is the single biggest investment play in the health care IT sector due to the need to be able to share and access data to be qualified for meaningful use, says Deepak Chaulagai, an Analyst at Dougherty & Company LLC.

“So just having an electronic medical record system is not going to be enough. It was enough in the beginning, but now you really have to have something that’s truly interchangeable over multiple platforms,” he said, “and I think eventually that’s where the government wants health care IT to get to.”

Chaulagai has a “buy” rating on HMS Holdings Corp. (HMSY), a health care IT, fraud, waste and abuse solutions services management company, because of its dominant technology to combat inappropriate payment in Medicaid. HMSY is the major player in its market with Coordination of Benefits contracts with 44 states.

“It has the most comprehensive claims database that they’ve been continually developing for the better part of two decades. HMS, as a COB contractor for a particular state, gets claims data from all of the health care payers in that state,” Chaulagai said. “That’s their core business, and that business has been growing rapidly.”

The increased penetration and adoption of smartphones, as well as tablets, are driving the major secular trend in the surge in mobile usage consumption increases, and benefiting the Internet technology and software sectors, says Richard Fetyko, an Analyst at Janney Montgomery Scott LLC.

“All that is changing the way the consumers are consuming content more on the go and really more rich and interactive content including video, social media, and that’s obviously increasing the consumption of content, but also changing and shifting the traffic sources to digital media,” he said.

Fetyko has Velti Plc (VELT), an online and mobile advertising technology company, as a top pick in the sector because it is benefiting from the growth in mobile usage and mobile advertising and marketing. He says Velti is 100% focused on basically helping mobile Web site operators and mobile carriers, as well as mobile application developers, to monetize mobile assets.

“Velti offers a mobile marketing technology platform. They’re growing at a 50% or so organic growth rate, and actually that growth could accelerate in 2013 based on our conversations with some of the private companies in this space,” Fetyko said. “Many of them believe that 2013 will actually be the real inflection point in mobile advertising and marketing spend.”

Small-cap stocks have generated outstanding returns for an extended period, historically, when coming out of a compression point in the market, where it has been flat for a decade or longer, and higher returns are expected over the next couple of years as a result of the recent recession, says Douglas G. Pugh, CFA, Principal and Portfolio Manager of Peregrine Capital Management, Inc.

“We are currently seeing average stock valuations coincident with higher margins earlier in the cycle,” he said. “As a result, what we are seeing today are not peak gross margins. We expect to see higher margins throughout the course of this cycle, higher than we have seen in the past.”

Pugh likes Hanesbrands Inc. (HBI), a manufacturer of essential apparel, undergarments and some outergarments. He says HBI is trading at only 11 times 2012 earnings estimates, but there are a lot of catalysts in place for improved earnings and higher valuation. Mr Pugh also favors the company’s 14% free cash flow yield, despite its large amount of debt.

“They have a lot of debt on their balance sheet, about 73% debt to cap, but they are a huge cash-flow generator. Management expects to deploy that cash to pay down in the neighborhood of over $800 million in debt over the next year and a half. If they do that, they will save about $0.45 per share in interest costs,” he said.

Investors should use the volatility in the markets to their advantage when investing in gold over time, particularly retail investors, by not panicking when stock prices drop, but equally not to assume that because stocks go up, it’s time to sell, says Adrian Day, Chairman and Chief Executive Officer of Adrian Day Asset Management.

“And we can think of many examples, particularly with the juniors, that tend to be more rapidly developing stories, when a stock with higher price might even be better value at the higher price, because of more things in the company,” he said. “So if you invest in the juniors, you really need to follow them.”

Day likes Virginia Mines Inc. (VGQ.TO), a prospect generator with a $300 million market cap. He says the beauty of that model is that it enables the company to retain its balance sheet. Virginia Mines has $44 million in cash, 20 joint venture properties, of which about six are active, and they’ve got about 3 million ounces in gold resources of various sites, Day said.

“You look at Virginia, and it’s gone from $4.50 to $9, to $2.50 to $8, to $5 to $9, $9.30. That’s a pretty volatile ride. But if you would have panicked when it was declining from $8 down to $2.50, I’m not sure when you would have got back in. That’s the problem,” he said.

The biotechnology and pharmaceuticals sector has outperformed during the last six months due to more stability in the macroeconomic front, and the pricing of health care reform and austerity measures into equity prices, leading to fairly stable revenue and earnings bases, says Ian Somaiya, Managing Director and Senior Research Analyst at Piper Jaffray & Co.

“What hurt the group for the better part of 2010 and 2011 was the lack of certainty in terms of what the revenue numbers and earnings estimates would be. There were price concessions driven by austerity measures in Europe, and health care reform either wasn’t fully understood or reflected in models,” Somaiya said.

Somaiya points to Gilead Sciences (GILD) as a great stock to own in the biotechnology space. GILD currently has HIV and hepatitis C medications pending approval, and Somaiya says the price volatility in the stock is unwarranted because investors are not considering both franchises in their expectations.

“We have a lot of very positive news related to the company’s HIV franchise, potential approval for another combination HIV pill – the quad pill – and approval for Truvada for the prevention of HIV infection. We also have the potential realization of their hepatitis C portfolio, with Phase II data from a combination oral regimen, which should be in by the end of this year,” Somaiya said.

Investors should look to the emerging midcap companies in the biotechnology sector for upside as the large-cap names are generally mature companies, and despite, sometimes outperforming the market, says Dr. Geoffrey Porges, M.D., a Vice President and Senior Research Analyst at Sanford C. Bernstein & Co., LLC.

“What we’re looking to do is provide our clients and their portfolios the opportunity to see a company go from $1 billion to $4 billion in value, and more and more, we’re looking for those in the emerging midcap names in our coverage,” he said.

Porges has Medivation, Inc., (MDVN) as a top pick in the midcap space. He says he has a $106 target price for MDVN, which recently was trading at about $74. Medivation is planning to launch a prostate cancer drug by the end of 2012 or early in 2013, which should replace older, ineffective treatments, Porges said.

“Medivation is right in the heart of that prostate cancer market. They have a drug that’s following in the footsteps of J&J’s Zytiga, which launched very successfully in 2011,” he said. “Medivation’s drug is probably the most promising new medicine for prostate cancer in a decade. It should be filed with the FDA by the middle of the year.”

Stock prices of soundly fundamental, well-managed, large-cap companies should reflect the growth in the economy, which will slowly improve over the next 18 to 24 months, and the low operating margins corporations established at the start of the recession are expected to improve and lead to better earnings, says Howard A. Trauger, President of Schuylkill Capital Management.

“We like the pace of the growth of this economy because with our 18-to-24-month investment horizon, we can take our positions in quality stocks when they are trading at today’s lower p/e levels,” he said. “We’ve identified industry segments and specific stocks that will likely benefit as the economy improves and as the fright factor diminishes.”

Trauger likes Union Pacific Corporation (UNP), the largest public railroad in the North America that operates on 32,000 miles of track. He says Union Pacific owns nearly a quarter of the Mexican railroad, and 2011 revenues of close to $20 billion were generated by the transport of coal, industrial and agricultural products, chemicals and automotive parts.

“Ten to 15 years ago, when the country was faced with record wheat and crop harvests, the railroads couldn’t find their boxcars, not so today. Clearly, this is big freight at its level best, and as the economy improves, more freight will move on a much more efficient platform than in years past,” Trauger said.

Free cash flow yield and the potential dividend a company can pay after capital expenditures are the focus when striving for absolute returns with below-market volatility in conservative, value-oriented investing, says Charles Goldblum, CFA, President and Founder of Hurley Capital, LLC.

“A double-digit free cash flow yield in a stable business should not have much downside. Put a potential catalyst in front of that company, and you are onto something. We also look at operating earnings and operating margins,” he said.

Goldblum points to Barrick Gold Corporation (ABX), a large, publicly traded gold producer in primarily safe jurisdictions, such as the U.S., Canada, Central and South America, as an example of an investment with low volatility and solid returns. He likes Barrick because of its low production costs, expected growth over the next several years and an undemanding valuation.

“In a world where money printing appears to be the intended cure to all ills, we like investing in gold as the unprintable currency. We’re expressing our interest in the sector via Barrick Gold,” Goldblum said. “Barrick’s diversified mines and projects make the firm a simple investment in a gold miner without undue country, project or currency risk. The main risk here is the gold price.”

The appeal of gold as an insurance policy against potential increases in inflation is to have a 5% to 10% allocation of liquid assets in the precious metal or mining company stocks as an investment for a five-year run to higher levels, says Kenneth Gerbino, Chief Investment Officer and Head of Kenneth J. Gerbino & Company.

“I think gold is popular still and will become more popular, not only in the United States, but also in the European countries, as well as Japan and China and India, where money-supply increases are continuing at a very rapid pace. The appeal of gold is not to have all your money in gold,” he said.

Gerbino likes Yamana Gold, Inc., (AUY), a company that’s producing gold for less than $300 an ounce. He says AUY is growing at about 25% compounded. Gerbino also believes gold and silver mining companies with known deposits in the ground are the best bets for investors in the sector.

“They have a very strong portfolio and their cash flow growth for the next four years will increase by about 38% a year. So Yamana is a good, solid low-cost company. They have a million-ounce-plus production status and will be producing 1.7 million ounces by 2014,” he said.