Do the year's biggest winners tell us anything about the future?
Let's have a look at the best performing shares of 2011.
"What's the point?" I hear you ask.
Well, I dunno, but I though it would be interesting and might help us with our stock selections from this arbitrary point in time we call "New Year"!
The first list looks at the FTSE 100's top performers from 1 January to Friday 16 December:
For comparison, the FTSE100 was down 9%, over the period.
I'm not really spotting many patterns here. It's no surprise to see the defensive stalwarts doing well in such a difficult year. But I'm surprised to see Next up there. And there's certainly a lot of optimism priced into Shire now.
It's hardly a big surprise to see no financials on the top list. If I was a betting man, which I am, I would bet that the equivalent list for 2012 will include a good few banks and insurers; so I have!
Widen the list to the FTSE All-Share and the top 10 performers are…
The All-Share Index was down 10% over the period.
Intellectual property investor IP Group is head and shoulders above the rest, assisted by good drug trial news from some of the companies in which it is invested.
Elsewhere, many Fools (myself included) made a handsome profit on Galliford Try, after the shares were flagged up as a value play by Stephen Bland in February.
If you want bigger winners still, then we have to look at the altogether riskier AIM market. The best AIM 100 performers were:
The AIM 100 index was down a scarily high 30% over the period.
And finally, or the really big winners, we need to consider all AIM shares; voila:
The AIM index was down 27.5% over the period (interestingly slightly better performing than the AIM 100).
As you can see from this final list, only the highest finisher from the AIM 100 makes the top ten of all AIM-listed shares.
So to really win big, we need to be looking at the smallest, riskiest companies of the lot. If I showed you the big losers list from AIM, though, the top ten would be filled by companies no longer in existence. It's all about risk-reward, in other words, though I did perceive fundamental value in API a couple of years back, since when it's gone five-fold.
The big winners of 2012
If you want to find the big winners of 2012, I would say you have to have the nerve to be contrarian. That means investing now in the many stocks that the market is shunning. But I would also suggest it's best not to try to seek out the real multi-baggers, but to concentrate on steady progress from real value instead.
That said, we all like a little excitement in our lives. So if you really want to find the ten-baggers, you'll have to accept the high risk that goes with your choices. The best starting point for further research may be the death or glory selections from the Fool's "Nicky Fraser Share Competition 2012".
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More from David Holding:
> David owns Royal Dutch Shell B shares. The Motley Fool owns shares in GSK, Imagination Technologies and Paypoint.