Turnaround Investing Blog

George Putnam, one of the country's leading turnaround and distressed investing professionals, shares his timely insight on the economy and turnaround investing opportunities.

Tax Loss Selling/Year-End Bounce

Year-End Bounce Candidates: Losers Become Winners (At Least For A While)

Excerpted from December 2012 Issue

Most of the time, our investment newsletter advises taking a long-term view and focusing on stocks where the underlying business fundamentals are turning around. However, around this time of year it is worth considering a shorter-term strategy based more on the quirks of the calendar--and the tax law--than on business fundamentals.

Every year around this time we see certain stocks get pushed down by artificial selling pressure. That pressure is removed after year-end, often causing those stocks to pop up nicely. The artificial selling pressure comes from two sources: tax-loss selling and portfolio window dressing.

Late in the calendar many investors begin thinking about their tax bill. This causes them to sell losing stock positions to realize capital losses that can be used to offset other gains that they may have. Around the same time, many professional portfolio managers begin worrying about their year-end reports to clients. They would rather not have their losing stocks show up in those annual reports, and so they sell the offending positions to get them out of the portfolio before it is memorialized at the end of the year.

The new year brings a clean slate with respect to both tax and reporting issues. When the artificial selling pressure stops, many of the previous year’s dogs jump up and suddenly become investor darlings--at least for a while. Ultimately, longer-term fundamentals will drive the prices of these stocks, but you can often make good money from this year-end bounce pattern.

For example, a year ago the ten year-end bounce candidates that we identified in the December 2011 issue significantly outperformed the S&P 500 through January. The outperformance narrowed, but was still meaningful, through the end of March. But by November the poor fundamental results from several companies on the list had dragged the group’s performance below the S&P’s. This is similar to the strong short-term performance (and weaker long-term performance) that we saw from the year-end bounce candidates that we identified in December 2010.

 Given the good performance of our year-end bounce stocks for the last two years, this year we are following the same stock-picking formula. The turnaround investing bounce candidates detailed in our full December 2012 article represent the worst performers in the S&P 500 over the first 11 months of 2012. Subscribe now (or log in if already a subscriber) to find out which 12 stocks you should consider adding to your portfolio right now for potential year-end bounce stock profit.

 

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The Turnaround Letter In The News: Equities.com & Forbes

With more than 30 years of turnaround investing and market-beating results, it's no surprise that media and market pundits often seek George Putnam's commentary, stock picks and unique contrarian expertise. Most recently, both Forbes and Equities.com praised The Turnaround Letter. Read More.

Market-Beating Profit: The 200+ Club

Turnaround stocks present a unique opportunity for savvy investors to buy in at bargain prices. Take a look at this list of just a few of our purchase recommendations that have realized a return rate of 200% or better:

Value Investing Stock Profit

* Bristow remains in our active portfolio (currently as a Hold), and 1,390% gain is as of 7/19/17.

Here's Why You Should Invest in Asset Managers

 

stock market advicex

 

This Forbes article cites a recent MoneyShow write-up that recommends investors take advantage of the strong stock market and potential interest rate hike by "putting some of your investment assets into the shares of asset management stocks."

 

The article praises The Turnaround Letter's OAK purchase recommendation and quotes George Putnam: "As the corporate debt binge that we’ve experienced since 2009 comes to an end, Oaktree will benefit from a growing number of restructurings and bankruptcies."  

 

Learn more about Putnam's investing success with turnaround stocks.