NOTE:I WROTE THIS ARTICLE DEC 31. A FLU AND WORK STUFF HAVE KEPT ME BUSY AND I REALIZED TODAY I HAD NEVER PUBLISHED IT. IT IS MY TOP TEN STOCKS LIST/TURNAROUNDS FOR 2014. WHILE SOME HAVE MOVED ALREADY I PLAN ON HOLDING THESE STOCKS FOR AT LEAST SIX MONTHS IF NOT LONGER.
It has been a sensational year in the stock market for most. A worst of breed drug store is up 332%. A electronics retailer that was rumored to be heading toward chapter 11 when it was trading in the 11's back in January is now above 40. A high school junior who is all of 16 years old bought some Twitter calls last Thursday (actually his mother bought them since he is underage) and by the time he was eating his baloney sandwich for lunch he had already cashed out with a double.
But not every stock was a Tesla this year. Some were actually down if you can believe it. So with gains across everybody's board, those rare equities in the red have been the perfect tax loss candidates.
Stocks are sometimes sold for tax losses but you wouldn't know it by their prices. Fresh buying often eats up at least some of the end of year supply. This creates the January effect. 2013 Winners get sold after New Year's Day pushing the taxable gain out an additional 12 months. Some 2013 losers get bought by value investors, some by those who sold them in December and some by those who follow strategies such as the Dogs of the Dow, or the January Effect.
I have compiled a top ten list of stocks that not only missed the boat in 2013 but they were thrown overboard. But these stocks are good swimmers and in 2014 they just may be able to swim with the tide. If we knew in advance that 2014 was going to be a repeat of this year we could just buy Berkshire or Google or an index fund and go fishing. But since losses are possible buying stuff that has already been creamed could give a shorter fall out of the window should 2014 turn into 2011 or yikes 2008.
1 and 2)EGO and AUY-Quick what is the most hated investment in the market today? GOLD. Is there even another justifiable answer? Well yes actually: Gold stocks. If the kid who trades twitter options can pick juniors he could make 1000% or so if the Gold market turns around in 2014. But since we want to be conservative let's pick two mid sized producers who have strong management teams and relatively low all in costs. EGO and AUY are longtime holdings of one of the top gold funds, Tocqueville Gold Fund and one of the top Gold newsletter writers, John Doody. EGO trades at 5.52, just 17 cents shy of its 52-week low and nowhere near the 22-plus price it traded at two years ago. AUY was more than 20 a year ago and now trades at 8.48, just above its 52-week low. Gold stocks doubled in a month and a half in late 2008.
3)CTB-The deal with Apollo is dead. What a waste of time and resources for all involved. It is the first step in healing. Cooper has a joint venture in China that needs to be patched up. Maybe Cooper buys the JV out. Maybe the Chinese JV buy Cooper. They tried to once before. More likely feelings are too damaged and the JV is unwound. All three good options for Cooper. Is there any bad news left for Cooper to announce? Earnings. Once they figure out the JV's numbers they will post last quarters financials. Does anyone think they will be good? NO. A chunk of the company didn't sell a single Cooper tire in the last 6 months. Will that news send shares down? Unless it is brutal probably not. Today's announcement of the deal break couldn't. The stock was up on volume. If one was short they likely would have covered at least some today. The bad news was out so why stay in. Shorts covered, longs added. The stock is trading in the low 24's right about where it was before the merger was announced. In the meantime the stock market has had a heck of a second half, including autos and Goodyear Tire has doubled in the last eight months.
4 and 5)MOS and POT-The Fertilizer stocks got hammered in late July on news of the Potash cartel falling apart. The damage was roughly 30%. Both have recovered a bit but are still way closer to the lows than the previous highs. These are large institutionally owned stocks. Perfect choices for tax loss selling. And for early 2014 buying.
6)GCVRZ- Ok this isn't a stock but a CVR. Unlike stocks (not counting bankruptcy) this could go to zero. 100% loss. Actually it is almost there. The FDA has denied/delayed approval of Lemtrada, a promising MS drug. Sanofi, the owner of the CVR is appealing. The CVR would have been paid $1 per unit if approval had been granted by the end of Q1, 2014. Still there are other milestones within reach for the CVR. $2 will be paid in the event net sales for Lemtrada total $400 million or more on a global basis during specified periods following product launch. The drug has been approved in more than 30 countries and has a real shot at hitting this milestone even without the US. At a current quote of 32 cents that would be more than a six bagger. The FDA's decision is just a day old so in late January when the 30-day period of waiting to buy back a losing stock expires there is likely to be renewed buying. Should Sanofi feel like they will achieve the 400m milestone they would be wise to buy back some of the outstanding rights in a dutch auction like they did back in October, 2008.
7 and 8)LH and DGX-Another sector that didn't join the party in 2013 was the laboratory testing companies. Perhaps the two strongest are Lab Corp and Quest. Lab Corp lowered guidance earlier this month and the stock fell to the bottom of its range in the mid 80's. DGX is weaker, just off its 52-week lows. These companies make a lot of money and are way out of favor. DGX has a PE of 11, LH 's PE is 15.
9)ANF-The second half of 2013 saw teen retailers sell off. ANF went from 54 to 32. Looking at a five year chart of ANF 30 has held 10 times giving it extremely solid support.
10)RGLD-Perhaps the best of the royalty companies. potential leverage offered by mining companies without several of the risks inherent in mining companies. Investing in royalty companies provides upside without several of the risks inherent in mining companies. The stock has gone from 80 to the mid 40's in 2013.