I'm working on a list of resolutions for 2009, but they have nothing to do with joining a gym or doing more volunteer work around town.
Sure, I could certainly stand to shed a few pounds or be a little more charitable next year. Then again, the market losses of 2008 have provided quite the workout, and more has been taken from my portfolio than I could reasonably give away.
So my list of New Year's resolutions revolves around stock market moves. If I'm right, I'll get plenty of exercise as I jump for joy. And my advice, in retrospect, will seem so charitable.
Let's dive in!
1. Buy the biggest losers of 2008, early in 2009
A brutal 2008 isn't ending well for some of the market's biggest bleeders, and understandably so. Investors have been selling dogs this month, turning paper losses into taxable advantages. Tax-loss selling is real, it's tactical, and it can be your friend if you play it right.
Take a look at some of this year's more prolific trading victims:
|
12/31/07 |
12/26/08 |
Loss |
|
|---|---|---|---|
|
Sirius XM Radio |
$3.03 |
$0.1269 |
(96%) |
|
Las Vegas Sands |
$103.05 |
$6.05 |
(94%) |
|
Suntech Power |
$82.32 |
$10.29 |
(88%) |
These stocks have definitely taken their lumps, with many of them earned. Sirius is tackling debt refinancing demons. Las Vegas Sands is scaling back in the once-booming Macau market. Suntech is getting slammed along with so many other solar energy plays.
I get it -- but premium radio, casino gaming, and solar power are also no-brainer growth industries when the market comes around. As long as you put in the due diligence to separate the duds from the studs, now is the time to buy into the year-end selling.
2. Buy the darling tech stocks after their quarterly earnings come out
I love bellwethers like Google
Sure, Google will hold up considerably better than the ad-dependent new-media arm of old-school periodicals. Apple is also moving a ton of 3G iPhones. However, I would rather sit out the next few weeks, figuring that the stocks will take a tumble after they deliver their quarterly results.
I don’t promise that I'm right. Maybe Apple and Google will blow the market away like they typically do. Even if the quarters are uninspiring, maybe the stocks will run up over the next few weeks, more than offsetting a conference-call letdown. I'm just not willing to take that chance.
3. Avoid the temptation to buy into sectors that won't bounce back
I have no problem buying into this year's biggest losers, but I'm sidestepping damaged sectors. You won't see me snapping up real estate developers, even if traders recently began nibbling at the ruins. Where are the catalysts for a recovery in prices for new developments when there are plenty of vacant properties sitting unsold?
There will certainly come a time to buy back into financial services, homebuilders, and automakers, but there is little reason to believe that the fundamentals will justify that action in the year ahead.
4. Follow the earnings
Analysts are hosing down profit projections on most -- but certainly not all -- companies these days. I've been tracking companies where Wall Street is actually revising earnings estimates higher, and I suggest you do the same in seeking out winners for 2009.
Trust me, they exist. Over the past three months, analysts have gone from expecting unmanned aircraft specialist AeroVironment
Earnings ultimately dictate share prices, so you may as well buy into the handful of companies that are gaining ground as the headwinds blow.
Good riddance, 2008
Don't get down about the year that was when you can get pumped about the year that will be. 2009 will bring plenty of challenges. We're certainly not out of the woods yet. However, the new year also brings new opportunities.
It always does.
Now I'm off to see about that gym membership.
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