The year just gone has been characterised as a year of surprises. But arguably the biggest challenge faced by investors hoping to outperform the market in 2016 was not actually that hard to predict – I say that based on the fact that it was the key risk I highlighted for our Tips of the Year 12 months ago. The challenge in question was the potential to miss out on a recovery in the resources sector.
It seems only fair to point out that comments about the potential for a recovery in the resources sector cannot truly be described as prescient on my part; had they been we would not have decided to avoid this part of the market when picking our eight plays for 2016. That said, we were at least right to give resources stocks a wide berth in the first month and a half of 2016 as this part of the market went through a final ghastly sell-off before beginning what has turned out to be a tremendous bounce back.
The IC companies team can also take some solace from the fact that we stayed true to our pledge at the time of making our 2016 Tips of the Year, to try to help readers prosper from the emergence of a resources recovery by providing tip ideas in our weekly tips section (tips that have a less prescriptive time horizon). Indeed, our resources picks played a major role in the outperformance of our 170 weekly 'buy' tips in 2016, which were on average almost 2 per cent ahead of ‘the market’ (9.5 per cent versus 7.6 per cent) based on an average tip period of about six months.