2020 Free Lunch Stocks Served: Just 3 New Lows Make the Grade
By: Jeffrey A. Hirsch & Christopher Mistal
December 20, 2020
2021 Stock Trader’s Almanac Shipping Update: Shipping was delayed this year due to production delays with the publisher, John Wiley & Sons. Currently the 2021 Almanac is in route to our warehouse and is expected to arrive early next week (on December 21 or 22). As soon as the 2021 Almanac arrives, we will begin shipping to subscribers. We apologize for the delay.

Publication Note: On Tuesday, December 22nd we will deliver to you our last regularly scheduled Alert of 2020 covering the January 2021 Almanac and Strategy Calendar, along with Stock Portfolio Updates. Our next email will be on January 5, 2021 (Santa Claus Rally results). However, if market conditions warrant an interim update, one will be sent. Happy Holidays and Happy New Year!
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. Our 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 quarterly options and index futures expiration – AKA Triple Witching Day.
This strategy takes advantage of several year-end patterns and indicators. First, the stocks selected are usually technically, deeply oversold and poised for a bounce, dead cat or otherwise. Second, all of the stocks are of the small- and mid-cap variety that will benefit from the January Effect which is the tendency for small-caps to outperform large-caps from mid-December through February. Lastly, the strategy spans the usually bullish Santa Claus Rally and the First Five Days of January.
To be included in this year’s list, the stock must have traded at a new 52-week low on Friday, December 18, 2020. 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. Preferred stocks, funds, splits, special high dividends and new issues were eliminated. 
This year there were only a handful of new lows before applying long-standing rules even after expanding the selection process to include OTCBB stocks. No stocks from the American Stock Exchange made the cut and only one each from NYSE, NASDAQ and OTCBB did. The three stocks that remain may not be suitable for everyone. Like past year’s we strongly encourage reviewing the stocks and preforming your own additional due diligence.
Our suggested guidelines for trading these Free Lunch stocks is to initiate a position at a price no greater or less than 2% of Friday’s closing price and to implement an 8% trailing stop on a closing basis from your execution prices. If the stock closes below 8% of the execution price or a subsequent high watermark, then the stock would be closed out of the portfolio. If any of these stocks trade in a window between -2% to +2% of Friday’s closing price on Monday, December 21, it will be tracked in the Almanac Investor Stock Portfolios using the trade’s execution price with an 8% trailing stop on closing basis.
If you buy these stocks, please note the following:
1. Consider selling them as soon as you have a significant gain and utilize 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.
[Free Lunch 2020 Table]
DISCLOSURE NOTE: Officers of the Hirsch Organization do not currently own any of the shares mentioned. However, we may participate in the Free Lunch Strategy.