Tips of the week 2012 review

Maybe. But conjure up thoughts like that and something will immediately bring us down to earth. In this case it is the average performance of the 60 buy ideas that we labelled 'speculative' and our 44 sell ideas.

Granted, the speculative label is a catch-all embracing anything from a management turn-around story to a blue-sky hopeful via a takeover situation in the offing. That's part of the reason why we served up so many speculative ideas.

However, one thing that speculative tips should have in common is that they are high risk. Hand in hand with the possibility of generating big gains, also comes the chances of nasty losses – speculative situations don't mess with Mr Inbetween. At least, that's the theory. But our 60 were comparatively dull. Sure, four of our best 10 tips came under the speculative label - copper miner Central Asia Metals, microchip designer CSR, mortgage lender Paragon and packaging maker API – as did the four very worst ones - electronic parts maker Stadium, oil and gas explorer Victoria Oil and Gas, nuclear engineer Redhall and west African gold explorer Aureus Mining. But there was no spectacular winner or horrible loser - no 10-bagger and no wipe-out situation, which is what you expect from speculative ideas.

Still, if truth be told, our sell ideas were worse than the speculative ones. The average return from our 44 sell suggestions was 9.2 per cent. That's a bit of an indictment because that also means that, on average, they did better than the FTSE All-Share index. It would be too much to hope for that, in a year when the market rose 8 per cent, our sell tips would on average fall because the market's pull is too strong. But for them to outperform the market as if they were buy tips is beyond a joke.

Which style wins?

As to the reasons, that's tougher to pinpoint. Perhaps we contrived too hard to squeeze ideas into a shape called 'sell'. It may also be significant that the four worst-performing sell tips - banks Royal Bank of Scotland and Lloyds Banking, plus pubs operator Enterprise Inns and holidays provider TUI Travel - were long-term bear stories that we reiterated yet again – and perhaps once too often. The good news is that we were relatively quick to reverse sell suggestions once they became loss-making and, in the case of Enterprise and TUI, we now reckon that shares in these companies are in recovery mode.

Besides, sell tips will always have their uses because, when crisis strikes, the share price of an affected company will fall much faster than the price of a successful company's shares will rise - and that brings the prospect of big gains and fast. Take our most successful recommendation in 2012 - to sell shares in South African platinum miner Lonmin. We suggesting selling at 699p in July and the price is now about 289p. In practical terms that would mean an investor would have borrowed Lonmin shares in July to sell them, simultaneously pledging to buy them back but at no specific date. If he bought them to return to the lender now he would pay about 289p, thus crystallising a 142 per cent gain, turning every £100 into £242 (see Top 10 table, below).

Top 10 tips

Worst 10 tips

But 'short selling' remains a minority sport. Most investors want to make their money through buying and holding shares. Hence the importance of the success of our growth and value tips. 'Growth' is short-hand for tipping shares in a company that already makes profits but is likely to see either above-average growth, if it’s a youngish company, or especially reliable growth, if it's more mature, for years to come. 'Value' can encompass reliable though unspectacular growth, although it's likely to include an above-average dividend yield on a payout that's likely to be comfortably covered by earnings.

However, it might also be one of these technical situations where a methodical valuation of a company produces a per-share figure that's considerably higher than the market price. For example, of our best value tips, property group Unibail-Radamco and financial adviser Fairpoint fall under the high-yield label, while housebuilders Barratt Developments and Berkeley stacked up on the valuation argument.

Of the top-performing growth tips, outsourcing services provider Quindell Portfolio and healthcare companies United Drug and Consort Medical came under the heading of 'young' and 'fast growth', while for example, property group Great Portland was much more of the 'old reliable' variety.

However, what was true of both our growth and our value tips - and it was a major reason for the above-average performance of both groups - was the absence of loss-making tips. Out of 36 value ideas, shares in only eight ended 2012 lower than the tip price. The growth ideas did better - only seven out of 49 ideas ended the year losing money.

We can only wish that 2013's growth and value tips will be as good. That said, clearly we have work to do on our speculative and sell ideas. Still, whichever style we label a tip idea, we always make the following point - for readers, our tips are just the start of the investment process. We try hard to ensure that our tips are sensible and well-researched but, when all is said and done, they are only suggestions. So, as we said this time last year, "an Investors Chronicle share tip is not a cue for you to phone your stockbroker. It's a cue to do your own research. Our tips are only the start of the process." Happy hunting.

Growth tips

Value tips

Speculative tips

Sell tips

*Does not include any dividends paid