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By Jason Stipp | 12-20-2012 04:00 PM

Investing Lessons From 2012

2012 shows the importance of paying attention to valuations amid the doom-and-gloom headlines.

Note: Pat Dorsey is the former director of equity research at Morningstar. He is now the president of Sanibel Captiva Investment Advisers.

Jason Stipp: I'm Jason Stipp for Morningstar.

2012 was an interesting study in how things don't always turn out as anticipated. So what are some of the big lessons from the year that was? Here to offer his insights is Sanibel Captiva Investment Advisers' President Pat Dorsey.

Pat, thanks for being here.

Pat Dorsey: Always a pleasure, Jason.

Stipp: So let's rewind back to the beginning of 2012. We had headlines about doom and gloom in Europe. We were starting to get worried about some of the emerging markets. Things here at home: unemployment was still very high. We had a lot of issues about the stalling economy …

Dorsey: We had an election coming up, and God forbid, a Democrat was in the election, too ...

Stipp: It didn't look like a great environment for investors. But when you look at the numbers here at the end of the year, there is a disconnect.

Dorsey: Yes. Last I checked, S&P is up about 17% [year to date] just before Christmas here. And I think that's a wonderful indication for people that, first of all, when the talk is of doom and gloom, that's probably when you need to be putting money to work.

And secondly, a lot of times, what's in the headlines is already discounted into stock prices.

Stipp: So let's tick off some of these. So you mentioned the S&P up about 16%.

Dorsey: Despite [the fact that] unemployment is still over 7%, it's incredible. But corporate profits keep doing reasonably well, and critically, the S&P started the year at about 12 times earnings.

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