The 10 most popular UK Value Investor blog posts of 2016

In this year-end review I’ll be looking back at the ten blog posts with the largest number of views in 2016.

But first, I should mention that I was going to start this blog post off with an extended look back at 2016 as a whole.

I was going to mention Brexit and Trump and the fact that, quite fittingly, Merriam-Webster chose surreal as their word of 2016, where their definition of surreal is “the intense irrational reality of a dream”.

But then I changed my mind.

So instead I’ll just crack on and do a Top of the Pops-style countdown of the ten most popular UK Value Investor blog posts of 2016:

10: My FTSE 250 forecast for 2016

In at number ten is this FTSE 250 forecast from January 2016, forecasting both fair value and expected value for the end of 2016.

My quantitative forecast of fair value (the level at which the FTSE 250’s CAPE ratio is equal to its historic average) was 15,338 (or 15,300 to a more realistic level of accuracy).

For expected value (the level you might reasonably expect the FTSE 250 to have at the end of the year, averaged across all possible alternative futures) was 16,700.

How did those forecasts work out?

Well, currently the FTSE 250 is at 17,900, so it’s still above both my fair and expected values, which means I’m likely to be slightly bearish next year as well.

Important point (!): These forecasts are indicative forecasts rather than concrete predictions because, as every good investor should know, the future is a volatile, uncertain, complex and ambiguous place.

9: Is the Fundsmith Equity Fund’s performance sustainable?

In at number nine is a blog post written in early 2015. It remained a favourite in 2016 though, largely due I think to the blatant use of Fundsmith as the main topic.

I found that Fundsmith’s accumulation units had seen dividend growth of around 12% per year since 2010 compared to unit value growth of 18% per year. I think the former is potentially sustainable while the latter is unlikely to be sustainable.

8: Some lessons learned from the Tesco value trap

The blog post at number eight can be summed up with a quote: “I made a big mistake with this investment”. Warren Buffett said that about Tesco and I feel the same way. However, having sold it in 2016 for a near-50% capital loss, there were some important lessons to be learned and this post-sale review covers the most important ones.

7: Is GlaxoSmithKline’s 6% dividend sustainable?

At number seven is a post about Glaxo, another major FTSE 100 company which has been in my model portfolio since 2015. Its share price has increased since the blog post was published and the yield is now a mere 5.2%, but the company and share price still look very attractive to me.

6: Model Portfolio update: 2016 Q1

In at number six is a review of the model portfolio from the start of the year, looking back at how it performed over the previous five years relative to the FTSE All-Share.

At that stage the “Brexit bounce” lay in the future and the model portfolio was performing well relative to an All-Share index which had been flat for over two years.

5: Next PLC: Share price declines make this retail stock very interesting

At number five is a review of a company where I’m actually positive (I often get accused of being negative about most of the companies I review, which is fair comment because in my opinion most stocks are not especially good investments).

I continued to be positive about Next throughout the year and recently bought shares in the company.

4: My secret investment plan for surviving and thriving after Brexit

I guess there had to be something about Brexit in the top ten somewhere and here it is at number four. My Brexit survival plan may not actually be very secret, but it is easy to implement.

3: Why UK house prices are likely to fall over the next decade

In at number three, it’s the UK housing market. This topic almost never goes out of favour, especially after a twenty year bull run.

I remain persistently bearish (and so far persistently “wrong”) and consider myself one of the few people who are clinically sane when it comes to house prices, especially those in London.

Perhaps “surreal” is a good description for London house prices as well as Brexit and President Trump.

2: My FTSE 100 Forecast for 2016

At number two it’s my 2016 forecast for the large-cap FTSE 100 index, published in December 2015. As usual it’s based on the CAPE ratio and has a year-end forecast for both fair and expected value.

The fair value forecast was 8,160 (or more reasonably: 8,200), showing that the index was and is below fair value.

The expected value forecast was slightly lower at 7,100.

With the FTSE 100 currently standing at 7,060 this looks like a surprisingly accurate forecast, although of course that is mostly due to luck rather than the mystic power of my non-existent crystal ball.

1: The FTSE 100 is cheap, thanks to a 20-year sideways market

And here it is; the most read blog post of 2016. It’s a mid-year review of the FTSE 100’s value, although this time without the forecast. This one has some nice charts, if I do say so myself, including the infamous “rainbow chart”.

Also of particular note was the FTSE 100’s uncovered dividend, which does not bode well for the index’s dividend growth over the next year or so.

So there we are; the ten most popular blog posts of 2016 covering market valuations and forecasts, company reviews, investment case studies, investment funds and surreal political events.

I’m off to eat some mince pies now, so thank you for reading the blog this year and I hope you have a Merry Christmas and a Happy New Year!