At the end of any investment period, you can produce a list of the 10 best-performing stocks and the 10 worst-performing stocks and, despite all the highbrow debate, opinions and blah-blah-blah, these lists are all you need to know.
As we look forward to 2013, which will surely be a better year, all we need to do is guess what's going to be on these lists in 12 months' time. How do we do that? Simple.
In any period, the stocks that move are not the stocks that do what was expected, but the stocks that do things that weren't expected.
If BHP hits its consensus forecasts, for instance, it won't be on the list. Share prices move on new information and surprises, rather than expectations being hit and forecasts being fulfilled.
There is no money to be made from consensus forecasts. What moves share prices is changes in consensus forecasts and expectations.
So forget what's cheap or expensive on current forecasts and forget what everyone expects. Imagine instead what's going to surprise us.
Your job for 2013 is to get a gin and tonic, sit by the pool, shut your eyes and imagine what's going to happen next year that no one expects.
This year, the ASX 200 was up 11 per cent, and the themes were pretty obvious. Anything to do with resources has underperformed and anything to do with banks, real estate investment trusts, healthcare, utilities, infrastructure and defensive stocks such as gambling have outperformed.
The 2012 performers list, which includes the banks and Telstra, might be characterised as a "safe income" list. But it isn't safe income at all a lot of these stocks have below-average yields.
It is a "reliable earnings" list. Westfield, for instance, has no earnings growth and a low yield (4.7 per cent), but is up 33 per cent this year.
All these stocks were bought because they represented businesses with low-risk, often regulated earnings, and not necessarily earnings growth.
The question is what's going to happen in the coming year that no one expects. Here are some possibilities. Don't laugh.
Someone sells a term deposit and puts the money into equities. Imagine that!
The new Chinese regime upgrades official growth domestic product growth forecasts. The resources sector goes into uptrend.
The US housing market leads a US economic recovery, driving cyclical growth stocks.
Fear subsides and the "safety bubble" deflates. Suddenly, a lot of boring stocks with no growth are going to look heavily overbought.
The Australian dollar falls and currency stocks come into focus.
Retailers have a good Christmas.
At the moment, there is no faith in retail earnings forecasts. But what if retailers move from talking about a "challenging outlook" and "we cannot provide any earnings guidance" to an "improving consumer outlook" and "expecting earnings growth of X per cent for the full year"?
Consensus forecasts have some major retail stocks on a 10 per cent to 13 per cent gross yield. Imagine if that turned out to be true.
Now get yourself a gin and tonic, and see what you can come up with.
For a free trial, see marcustoday.com.au. His views do not necessarily reflect the views of Patersons.