A funny thing happened on the way to the Christmas holidays and the end of the final quarter of 2020. All of a sudden, out of the blue, shares of multiple unrelated stocks began to sell off.
As the final hour of trading got under way Wednesday, shares of database software company MongoDB (NASDAQ:MDB) tumbled 4.8%, car charging network operator Blink Charging (NASDAQ:BLNK) fell 7.8%, and biopharmaceuticals Denali Therapeutics (NASDAQ:DNLI) and Ampio Pharmaceuticals (NYSEMKT:AMPE) fell 5.2% and 35.5%.
What do these four stocks have in common? Honestly, not a whole lot, other than the fact that they've all enjoyed some stellar stock price gains this past year.
Over the past 52 weeks, Denali stock is up 391% and Ampio is up 475%. Tiny Blink, with less than $5 million in trailing revenue, has put together 2,324% in gains -- a 24-bagger! Even the slowest stock of this bunch, MongoDB, has nearly tripled in price, up 193%.
In the absence of any specific bad news that might explain the selling, it seems some investors have decided to cash in and cash out, and turn their paper profits into cold hard cash before the end of the year. That's not necessarily a bad idea.
That might even be a smart move. Tax reform under the Trump administration means that folks who've enjoyed big gains in 2020, and who choose to take profits before the new year, can expect to pay less -- perhaps significantly less -- tax on those capital gains come April 15, 2021 than they might pay under the incoming Biden administration if they wait until January or later to sell.
Alternatively, though, if waiting a few months before selling means that you can classify your profits as long-term capital gains rather than short-term (i.e. profits from stocks held less than a year), patience before selling might still turn out to be a virtue.