Tax Loss Selling-Update

On December 18, I wrote in a column titled: “Tax Loss Selling“.

“From early November until about December 23 investors tend to get rid of losing stocks for tax purposes. Reports indicate that this effect drives down many prices to 52 week lows and that these stocks selling at their lows around mid December usually outperform the markets through January and February.”

I then attached charts of two companies that I felt met the criteria of “tax loss” candidates and that we should monitor them to see if they continue to drift lower till year end and then rebound after Christmas and through January.

The two “Tax loss” candidates that I chose were Allon Therapeutics Inc., Ticker Symbol NPC on the TSX and Hanwei Energy Services Corp: Ticker symbol: HE, also on the TSX. I recommended buying NPC at $0.25 expecting it to trade back up to the $0.35 to $0.45 levels in January. I also suggested buying HE at $0.50.

As of the close of trading yesterday, a mere 18 trading days since my recommendation NPC has traded up from $0.25 to yesterday’s high of $0.40 a 60% return.

HE, recommended on Dec. 18 at $0.50 traded as high as $0.85 last Monday and closed Friday at $0.79 for a 58% return.

As these two examples have proven, devoting your attention in mid October and early November to stocks that have performed poorly throughout the year could prove financially rewarding. The only problem is that we have to wait 10 months for another shot at these annual opportunities.