As a reminder, our “Free Lunch” strategy is purely a short-term strategy reserved for the nimblest traders. Traders and investors tend to get rid of their losers near yearend for tax loss purposes, often driving these stocks down to bargain levels. Research has shown that NYSE stocks trading at a new 52-week low on or about December 15 will usually outperform the market by February 15 in the following year. We have found that the most opportune time to compile our list is on the Friday of December triple witching which often further depresses already distressed equities and leaves plenty of time to capitalize on the Santa Claus Rally and January Effect.
To be included in this list, the stock must have traded at a new 52-week low on Friday, December 19, 2014. Then, preferred stocks, funds, splits, special high dividends and new issues are eliminated. To remain on this year’s list, the stock had to still be trading at $1.00 or higher as several online trading platforms place additional restrictions on a trade when shares are below $1.00. Furthermore, the stock had to average at least 25,000 shares per day over the last three months and have a market cap of at least $20 million. Finally, any stock that was not down 30% or more from its 52-week high to the 52-week low reached on Friday were also eliminated.
Unlike previous years, we have suggested specific buy limits and stop losses for each stock included and the trades will be tracked in the Almanac Investor Stock Portfolios.
If you buy these stocks, please note the following:
1. Consider selling them as soon as you have a significant gain and utilizing stop losses.
2. The stocks all behave differently and there is no automatic trigger point to sell at.
3. Standard trading rules from the Almanac Investor Stock & ETF Portfolios do not apply for these stocks.
4. We think you should be out of all of these stocks between the middle of January and the middle of February.
5. Also, be careful not to chase these stocks if they have already run away.
DISCLOSURE NOTE: Officers of the Hirsch Organization do not currently own any of the shares mentioned. However, we do plan to participate in the Free Lunch Strategy this year.