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Five More Tax Loss Selling Plays to Buy Before the New
Year
By Michael Brush
December 21, 2005
Only seven more shopping days left – to buy tax-loss selling candidates.
These are the 2005 losers that investors are dumping now so they can ring up
tax losses before the year ends. They’re shopping for tax losses to offset
2005 capital gains in stocks.
The pressure they’ve been putting on stocks can create bargains --
especially if insiders are buying at the same time.
To find some of the best potential tax loss selling plays, I scanned the
small-cap insider buy stocks to find the ones that are down the most for the
year. This suggests tax loss selling is pressuring these stocks now as the
year comes to a close. But they are potential winners for 2006 because
insiders are bullish.
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Here are five more to add to a list of five I wrote about in my last column
here:
click here
Tercica (TRCA)
shareholders got a “baaa humbug” from the Food and Drug Administration a few
days ago when the regulators took away marketing exclusivity for a growth
hormone product. The stock got hammered, falling to $7 from $10. Then two
insiders then stepped up and bought over $1.3 million worth of the stock.
That’s pretty bullish!
Avanex (AVNX)
shares have fallen to $1.11 from $3.50 this year, leaving plenty of
shareholders disgruntled. More of them will be selling shares of this
optical networks equipment provider as the year winds up to generate tax
losses. But the chief executive recently bought $179,000 worth of stock at
90 cent a share – signaling value near current levels. For a brief walk down
memory lane, consider that this stock once traded for $270 per share in the
tech bubble days.
Inergy (NRGY)
stands out among energy stocks because it is trading near its lows for
the year. In contrast, most energy stocks have posted solid gains. The
company processes and distributes propane and other derivatives of natural
gas in the Midwest and Southeast. Insiders have been buying in the $26.50 to
$28.90 range since the stock broke down. At recent levels this company --
which is a limited partnership -- offers a dividend in the 7.8% range. Be
warned: Limited partnerships create special complications at tax time which
you will have to deal with if you own this stock.
MCG Capital (MCGC),
at $14.50, has an entire shareholder base that is looking at losses for
2005. That has to contribute to selling pressure as the year closes. But
insiders, including the chief executive, are buying aggressively in the low
$14 range. Down here, the company pays a hefty 11% dividend. MCG Capital
provides financing and advisory services to smaller companies, especially in
the media and telecom space. A.G. Edwards recently started coverage of the
company with a buy rating.
MDC Partners (MDCA)
shares have fallen to $6 from $11 since the start of the year. It’s been a
long and grinding decline for shareholders of this Toronto-based company
which provides marketing, and offers products and services that help create
secure transactions. So there’s bound to be downward pressure on the stock
now from investors who are throwing in the towel for the year. Down here,
the stock trades cheap. It goes for .35 times sales and less than book
value. Insiders, including the chief executive, recently purchased
substantial amounts in the $6 range – or near current prices.
The bottom line: Buying these stocks now puts together two strategies
that can give you an edge in the market: Picking up tax loss selling
candidates and following the insider cues. I think all of these are buys
right now for decent gains as a group in 2006 or beyond.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in
any of the companies listed in this column. Mr. Brush is an independent
columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About
Insiders Corner:
http://www.investorideas.com/insiderscorner/. InvestorIdeas.com
Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article.
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