It’s the time of the year for savvy investors to review their portfolio and draw up their own naughty and nice list.
For the “naughty,” selling off your investment-losing stocks reportedly makes sense for one big fundamental reason: taxes.
“Selling losers is a time-tested strategy—and you can always buy them back in the new year,” Barron’s said.
“Stock trading can be difficult to understand. It’s even more difficult to make a living at it. The ranks of traditional Wall Street traders who execute orders for institutional clients are dwindling as machines take over,” Barron’s explained.
“Sell losers [is] obviously always a theme,” one veteran brokerage trader tells Barron’s. “Check mutual fund year-end dates. Not everyone is on a December calendar, and that tends to spread out the impact of that trade a bit,” the trader said.
Barron’s explained that any year’s biggest losers tend to rise in January because all the tax-loss selling pressure ends.
Here is a handful of stocks Barron’s recommending dumping before the Times Square ball drops on New Year’s Eve.
All four have dropped a lot in 2019—about 34% on average.
- Macy’s (M)
- Abiomed (ABMD)
- 3M (MMM)
- Occidental Petroleum (OXY)
Meanwhile, Bloomberg recently explained that "a vanilla 60/40 portfolio -- 60% stocks, 40% bonds -- is now on course for its best year since 2009 -- a feat that few see being repeated anytime soon."
As December beckons, sell-side prognosticators sound anxious, though not quite bearish. Societe Generale SA, Morgan Stanley and Goldman Sachs Group Inc. are among those telling clients that beloved strategies -- America First trades, quality shares, selling volatility -- offer fewer rewards in 2020. Growth and valuation risk is the mantra.
Add the struggle to reach a phase-one U.S.-China trade deal, and investors are in no mood to revel in this year’s double-digit returns, Bloomberg said.
“We have been bombarded by these outlooks for 2020,” said Alberto Tocchio, chief investment officer at Colombo Wealth SA in Lugano, Switzerland. “But I wouldn’t be so sure that growth will expand in any considerable way if a trade deal is not signed.”
Colombo Wealth has been turning more defensive over the past month, reducing positions in U.S. equities and instead switching into European value stocks and U.K. domestic shares.
Uniting a host of Wall Street analysts is the view that the U.S. isn’t on the cusp of recession, global manufacturing can recover from its woes and easier monetary policies can deliver a boost to growth. Low interest rates are bidding up bond-proxies while haven demand is juicing quality stocks.
Receding fears of economic reversals are creating a perfect climate for the active manager, in theory. Correlation among the top 50 U.S. shares has been falling of late. It’s a sign there’s “little if any macro risk anxiety, with fund managers seeming to be increasingly comfortable with buying idiosyncratic investment stories,” Citigroup Inc. strategists led by Tobias Levkovich wrote in note.
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