Several popular seasonal trading strategies are associated with the closing and opening weeks of the calendar year. Bank of America analyst Savita Subramanian recently highlighted three of his favorite trading ideas for January 2023, and that could be good news for them Tesla Inc TSLA, Meta Platforms, Inc. META, Match Group Inc MTCH and some of the other worst-performing stocks of 2022.
Candidates for tax losses: Subramanian said one of his best ideas for January is buying tax-losing stocks for the new year. These stocks include some of the worst performers of 2022, which have a history of outperforming once the calendar rolls into the new year.
Generac Holdings Inc. GNRC, Match and Tesla are the three worst-performing stocks of 2022, but other laggards that could see a January bounce include Meta Platforms, PayPal Holdings Inc PYPL and carnival corp CCL.
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Dash-to-Trash Trading: In addition to the worst-performing stocks of 2022, Subramanian recommends the “Dash to Trash” trade through January.
“Since 1986, low-quality stocks (based on S&P common stock rankings) have outperformed high-quality stocks 80% of the time in January, although the hit rate is lower after years of S&P 500 losses,” he said.
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Bank of America’s Dash to Trash screen includes stocks like Lumen Technologies Inc LUMNS, Viatris Inc VTRS and Carnival.
Finally, Subramanian said investors should dump the top overweight stocks in long-only funds and buy the top underweight stocks. The list of the company’s top overweight stocks includes: Baker Hughes Co BKR, Carrier Global Corp CARR and Royal Caribbean Cruises Ltd RCL. Underweight stocks that could outperform in January include United Health Group Inc UNH, DR Horton Inc DHI and Johnson Controls International PLC JCI.
Gasoline Gas Take: Seasonal trades are by no means a guarantee, and traders would do well to remember that these trends are only temporary fluctuations and should not be viewed as long-term recommendations. In fact, many of the worst-performing stocks on the market underperform for good reason, and can be unfortunate long-term investments.
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