As the year draws to a close, investors have started looking forward to 2011. With the market having made substantial gains over the past two years, it's more important than ever to make sure you identify investments that still have room to run. Otherwise, you could easily see the rebound you've probably enjoyed in your portfolio since the market meltdown reverse itself.

A look at market sectors
Since late 2008, the entire market has shown a lot of strength, recovering strongly from the financial crisis. Currently, the S&P is up 40% from December 2008, having posted a rise of about 13% in the past 12 months to go with 2009's big jump.

But the gains in the market haven't been felt equally. Some sectors have performed a lot better than others. In particular, consumer discretionary stocks have rebounded the most, with technology and materials also posting strong gains from two years ago. The strength of discretionary stocks isn't terribly surprising, looking at the performance of Amazon.com and Ford Motor (NYSE: F), which came from far different positions to assert themselves as industry leaders. Amazon has long been the undisputed leader of e-commerce, and it has only cemented that role lately. Ford, on the other hand, came back from serious financial trouble to regain its stability and lead the auto industry out of its slump.

Meanwhile, other stocks can hardly point to any gains from the depths of the market meltdown. Utility stocks and health-care companies alike have shown only modest gains over the past two years, with utility Exelon (NYSE: EXC) actually down over the past two years in the face of low demand and flagging natural gas prices that hold down the value of its nuclear-generated power. Similarly, Pfizer (NYSE: PFE) and Eli Lilly are just two of the many big pharma companies facing major pipeline concerns in the next few years, and that has some shareholders on the run.

What's next?
So with all that as background, you need to turn around and ask the much more important question: Where will next year's best-performing stocks be, and how can you best invest in them?

From a value standpoint, looking at the beaten-down sectors is the obvious place to start. Among the two worst-performing sectors of the past two years, health care has a lot more promise than utilities right now. Many utilities are hyper-regulated and need demand to rise, yet one of the biggest drivers of utility revenue, natural gas, remains mired in a multi-year bear market and shows signs of glut conditions for years to come. In contrast, the worst news for the health-care industry is behind it, as investors fully expect health-care reform to bite hard into profits. That's indeed possible, but any reality that falls short of those fears could give shareholders a big boost. That's why betting on health care using the SPDR Health Care (NYSE: XLV) makes more sense than looking at utility ETF SPDR Utility (NYSE: XLU).

Conversely, even after big gains, some of the top-performing sectors could easily see more gains. Even though technology stocks have seen some huge winners, several major players haven't really participated. Cisco Systems (Nasdaq: CSCO), for instance, recently projected slower growth ahead, throwing its stock for a loop. And Hewlett-Packard is still trying to recover from the Mark Hurd fiasco to reestablish its place as a hardware giant. But if you believe that the long-term prospects for the economy are favorable, then these stocks could join the tech bull -- and SPDR Technology (NYSE: XLK), which has a focus on big names like those, could see bigger gains.

The prospects are perhaps more uncertain for consumer discretionary stocks. Most of the easy gains have already been made for many companies, and with valuations that assume the consumer will be back in full force, any shortfall in expectations could hit stocks hard. That makes SPDR Consumer Discretionary a highly uncertain prospect right now.

Make the right play
Sector-specific investing is challenging, as sectors move in and out of favor. But if you can identify potential winners and anticipate future trends, sector ETFs give you the easiest way to profit from your foresight.