Winning With Losers
By ANDREW BARY | MORE ARTICLES BY AUTHOR
An early-year strategy of embracing the previous year’s worst S&P 500 stocks has produced fat gains
One early-year investment strategy is to buy the prior year’s 10 biggest losers in the S&P 500 in hopes that they’ll bounce up in early January.
This approach has worked well in the past three years. In fact, the 10 biggest decliners from 2011 started 2012 with a bang, gaining an average of 13.7% in the first two weeks of January, compared with their Dec. 31 close, against a 2.5% rise for the overall index. That group was led by Netflix (ticker: NFLX), Bank of America (BAC), E*Trade (ETFC), and First Solar (FSLR).
via Winning With S&P 500 Losers – Barrons.com.
A very good client of ours sent me this email over the weekend. I think there is definitely some merit to it. There was a time when I trained brokers at Paine Webber. Mutual fund wholesalers used to come in, buy us lunch, and show us their best funds. One day I got frustrated and interrupted the mutual fund representative and said “tell us about your worst performing funds. All we’ve been doing is selling your best performing funds to our clients and watch them turn into your worst performing funds. Maybe if we start with the worst we’ll have a better chance.”
There is definitely something to buying the dogs. On this list, I purchased a little BBY in the last couple of days. More because I think it’s been slaughtered and the former CEO will make a buyout offer perhaps.