Opportunities From Year-End Tax Loss Selling

By on December 4, 2014

Casualty of WarAs the year concludes investors often seek ways to offset capital gains by realizing losses in underperforming holdings. This seasonal selling pressure can result in opportunities for future gains in January and beyond when demand reaches equilibrium. In the Closed-End Fund (CEF) world this often results in above average discounts to Net Asset Value (NAV) as noted in this post from last year [link].

The oil and gas industry appears to be a prime area for picking up bargains currently, but unfortunately I already made my bed there with some ill-timed purchases earlier in the year. Any further allocation of the SMA Portfolio to the energy complex would be imprudent.

Currently Templeton Global Income Fund (GIM), a CEF, trades at a discount of 9% to its NAV. The current discount is outsized in relation to GIMs history. GIM has a very reasonable expense ratio of 0.73% for a CEF. I plan on allocating seven percent of the SMA Portfolio to GIM in the near future.

Gerdau S.A. (GGB), a large Brazilian steel company ($6.8 billion market cap), is currently trading 27% below its 200-day moving average after a brutal sell-off. According to trusted sources GGB has a cash position of $1.8 billion and trades at a 40% discount to its book value. I plan on allocating 1.5 percent of the SMA Portfolio to GGB in the near future.

Thompson Creek Metals Company (TC) is a small cap company ($327 million) engaged in mining, milling, processing, and marketing of copper, gold and molybdenum products in the United States and Canada. TC is currently trading at approximately 40% below its 200-day moving average, holds a large cash position in relation to its market cap, and is currently changing hands at 70% below its book value of $5.00. TC is currently suffering net losses. I plan on allocating one percent of the SMA Portfolio to TC in the near future.

International Shipholding Corp. (ISH) is a small cap company ($115 million) that provides international and domestic maritime transportation services to commercial and governmental customers primarily under the medium to long-term time charters or contracts of affreightment in the United States and internationally. ISH is currently 24% below its 200-day moving average, trading at a 64% discount to book value and yields six percent. I plan on allocating 1.5 percent of the SMA Portfolio to ISH in the near future.

These speculations will be funded through the sale of a portion of the Vanguard Short-Term Corporate Bond ETF and available cash holdings.

Disclaimer: It is very difficult to outperform a buy and hold strategy. Investors, in past experience, have been well-served over long-term time horizons by investing regularly in a diversified portfolio of stocks or low cost, broadly diversified indexed stock funds. Information presented is largely based on analysis of past data and assessments by the Tactical Timing System model. Future performance may not reflect past performance. Profitable trades are not guaranteed. No system or methodology ensures stock market profits. Although accuracy is strived for, no guarantee is made regarding the accuracy of data presented.

One Comment

  1. Barron Maestro

    December 4, 2014 at 8:25 pm

    All of the trades mentioned in the post were accomplished today as follows:

    VCSH was sold at $79.90
    ISH was purchased at $15.375
    TC was purchased at $1.56
    GGB was purchased at $3.91
    GIM was purchased at $7.73

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