3 Stocks Ready to Bounce in 2013


George Putnam Image George Putnam Editor, The Turnaround Letter

Sometimes opportunities present themselves and even long-term investors can play a trend that may be complimentary to their long-term strategy as is the case with the stocks below observes George Putnam of The Turnaround Letter.
Most of the time, we advise 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.