Turning Tax Losses into Gains: Your December Stock Picks

Nine Potential Plays for Tax Year End Investors

Sorry for the short notice with this, but time has run away with me this week.

It’s that time of the year again. Not Christmas, but the end of the North American tax year.

Here’s what happens: institutional and retail investors sell their badly performing stocks to realise a tax loss, which they can then offset against gains elsewhere. Thus, they reduce their tax bill.

Because of the selling, companies that have done badly get even more beaten up. But come January, the selling stops, and the stocks usually rally.

So the trade is this: Buy as tax loss selling climaxes, then flip in January-February as normality resumes. My broker thinks I should wait till March, but hey.

The climax of North American tax loss selling usually comes in the final two or three days of trading - which would be today, Friday 21, and Monday. The final day of tax loss selling is Jan 30/31 so you have until then …

Some years it works better than others. Some picks work better than others. But gains of 20-50%, even doubles sometimes, are not unknown. Hence the attraction of the trade.

It’s also an opportunity to pick up cheap stock in companies you like the look of with a longer-term timeframe in mind.

I’ve spent some time this week looking at charts, and together with my broker and his researchers, we have put together 9 possible plays for you.

Here they are.