FREDAlert!
Volume 5, Issue 2
December 9, 2013
This year’s tax selling list is more difficult than the previous years because the strategy, known as “The January Effect”, works best when several sectors have underperformed and have several good fundamental stocks with losses that will rally back sharply at the beginning of January. 2013 has enough commonality that, with the exception of Metals and Mining, most sectors have been up by varying degrees. We look at stocks or ETFs that have made new 52 week lows in October, November, or December, and this year there are so many bond ETFs on the list that we do not believe are candidates. We have looked at several lists that have been prepared for us by others (and my thanks to those who have donated lists), as well as running our own screens, and the “pickings” are leaner than the last two years.
There are two ways to buy these stocks, but the overall idea is to add them in the last two weeks of December, then sell them on the last trading day of the following January. We have tried both ways. One way is to just add full positions as close to the middle of December as possible. The other is to add half positions at the middle of the month, and then another half at the end of December. Traders should take note of this, especially with the gold stocks on this list as they could continue to fall – that is the biggest losing area of the market. For the purpose of this report we will use a buy limit and add the position at the end of trading on the day the report comes out. In most cases this is above where we think the stock should trade, but will keep us out of the name if there is a big gap up. If the stock does not trade at the limit by Friday, December 13th it will be dropped from our list. All stocks will have a sell limit and will either be sold when that is hit, OR on the close of the last trading day in January, whichever comes first.
The stocks are grouped by sector, and the buy and sell limit price are given below.
- AUY: 8.87, 9.98
- AEM: 26.90, 28.40
- VIV: 19.50, 21.39
- RHT: 47.20, 49.50
- CSCO: 21.40, 22.60
- CTL: 31.45, 33.10
- CIB: 50, 52.80
- TEVA: 40, 42.40
- ACC: 33.20, 35.20
- KOS: 11.50, 12.60
Again, we wish subscribers a Happy Holiday Season.
Follow up: (February 6, 2014):
As of January 31st the tax loss bounce season is over, and we close out the names on our tax loss bounce list. When we published the list in December, we explained that 2013’s list was unlikely to do as well as past lists because of the unidirectional trading of 2013. Since January 2014 has been a difficult month, we are happy with the list and will comment on the performance below.
Of the ten stocks on the list, five hit their targets before the end of January. Seven stocks were winners, and three losers. The average gain if the whole portfolio was purchased was 2.85%. The biggest gain was 20% and the biggest loss was 12%. For a trading list, given recent market performance, we are happy with this performance. We show the table below.