Purpose:
Demonstrate that buying when the majority are tax loss selling is an annual, profitable and repeatable event.
Goal:
Illustrate that 25% plus profit can be made in a 60-day selling target zone.
Trade a grouping of tax loss ideas rather choosing one or two stocks. It is the statical edge presented from tax-loss selling season that you are after, not a rife-shot on one or two names.
Summary:
Of 15 stocks all but three are above the starting price. Success rate of 80% to date.
Of 15 stocks, eight hit the 25% or higher appreciation level. 53% success ratio to date.
We worked within the arena of our investment themes. Blockchain/Crypto – Energy – FinTech and Precious Metals. We did this to illustrate that we are not doing any new name stock selecting. We are working within the universe we worked all year.
Additional factual info that expands the “Hunting Season” for trading tax-loss dumped stocks:
Individual investors are working with December 31 year-end date for the end of Tax-loss selling period. Mutual Funds have an October 31 of each year, fiscal year-end date. Therefore, we have two periods where we can “go hunting” for tax-loss selling ideas.
Conclusions:
- A money management tactic might be to auto-sell 50% of a position, at the 25% profit mark and let the remaining amount ride. Stop out with a trailing stop-loss.
- Buy into the opportunity from others selling in October, November or December and you do your tax loss selling in January, February or March. It takes a bit more planning but can generate additional cash returns.
We hope you find this of practical interest. It is the same as shopping at a fire-sale or summer garage sale. The more you understand your companies the higher the probability of working this strategy. This also works with ETFs. Not as good as with Mutual funds as mutual funds sell and actually buy the higher price of the best performing stocks. This is called window dressing and is done so fund managers look better than they actually are. This is counter to being in your best interest.
Summary:
Buying Tax-loss stocks can be a annual, predictable and rewarding activity. Take advantage of what the market gives you.
Accounts related to LOTM holds positions in GBTC, ETHE, SLNH, SLNHP, CLMT VET, PAGS, STNE, VZLA, BRPHF.
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Written January 28, 2023, by Tom Linzmeier, for Tom’s LOTM Blog at https://lotm.substack.com/.
Accounts related to LOTM and Tom Linzmeier can & will, buy or sell securities at any time.
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