Forget the Malls… The Really Great December Deals Are on Wall Street

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The S&P 500 is up 157% since March 2009 and, until last week's pullback, the concept of value investing seemed deader than a doorknob.

Everything is too expensive, they say…

Stocks have been bid up to unrealistic levels, they insist…

Multiples can't support further growth, they challenge…

Not true.

Believe it or not, there are actually plenty of companies that have been cast aside in this year's record-setting bull run. Even more are being put on sale right now.

Here are three firms to get you started right now.

Move quickly, though.

This could be your last chance to take advantage of these "deals"…

Their Loss Will Be Your Gain

Every December, investors with large gains engage in a time honored tradition known as "tax loss harvesting." If you're not familiar with the term, that's what the practice of selling big winners and big losers is called when it's done to offset what would otherwise be onerous capital gains taxes.

While technically not against the law, it's one of the few legitimate tax minimization strategies left. That makes it very popular late in the year when lots of people turn their attention to tax planning.

This year I'm expecting more active tax-loss harvesting activity than normal for two reasons:

  • Every major index is up big – the S&P 500 has risen 25%, the Dow has tacked on 22%, and even the Nasdaq is good for a 34.7% run; and
  • Many investors are holding big gainers that date to March 2009 lows.

Ergo, many investors – large and small alike – have a serious incentive to minimize taxes. That, in turn, gives me an equally serious reason to go bargain hunting.

So forget the Santa Claus rally… and sharpen your pencils.

The real "gift" this holiday season is going to be courtesy of the taxman and some good old-fashioned selling.

But act quickly if you want to get on board.

The pronounced dip that often results from harvesting related sales is frequently followed by equally aggressive buying that continues through the balance of the month and even into the New Year.

Here are three companies to get you started:

Target No. 1

Mosaic Co. (NYSE: MOS)

The Mosaic Company is down nearly 15% year to date. It is the world's largest producer of phosphate and North America's second largest producer of potash. Its products are absolute necessities in the growth of corn, rice, and cotton. That makes them very different from the discretionary choices everybody fancies at the moment in a rush that is obviously closely related to holiday shopping.

My rationale for wanting to own it is pretty simple.

The world's population is continuing to expand and population trend watchers believe there could be 9 billion inhabitants on planet earth by the year 2050. Where is all the food going to come from, especially when there is a limited amount of room to plant new fields for crops? Mosaic is attempting to help answer those questions by producing fertilizers that will yield more crops at a lower cost.

Mosaic is, in effect, doubling-down on phosphate.

Recently, the company purchased CF Industries Holdings' (NYSE: CF) phosphate business unit for $1.8 billion, which will add 1.8 million tons of phosphate annually. Also, the wheels are already in motion with Ma'aden, the Saudi Arabian Mining Company, for production of an additional 3.5 million tons by 2016.

The company currently has a yield of 2.1% and is actively buying back shares, which can add anywhere from 1% to 2% to returns.

Target No. 2

Yanzhou Coal Mining Co. Ltd. (ADR) (NYSE: YZC)

Coal has been as unloved as it gets this year, which is why shares have been confined to the proverbial waste bin. It's off nearly 40% year to date and may be a perfect candidate for coal's rebound.

My rationale for this one is straightforward as well.

China is energy starved. Not surprisingly, the Red Dragon is currently the world's largest importer of coal. Regardless of the "talk" surrounding China's use of alternative, renewable energies, the truth is that a viable coal-based alternative is still decades in the making.

Plus, the company has a yield of 4.7% at the moment, which is hefty compensation while you wait and an added bonus for income oriented investors.

Target No. 3

HCP, Inc. (NYSE: HCP)

HCP is a healthcare industry-oriented REIT that's gotten clobbered to the tune of 20% this year.

The company's portfolio of assets includes senior housing, skilled nursing, life science, medical offices, and hospitals.

My thinking here is that, as the baby boomer generation is heading to the doctor more often, they'll find themselves shopping for the best nursing homes. Those with the best amenities will come out on top. I think demographics are going to buoy HCP's share price.

But what really puts this one on my buy list is the fact that it's dividend "royalty." A member of the S&P 500 Dividend Aristocrats Index with 28 consecutive years of dividend increases, HCP currently pays a hefty 5.5% dividend yield.

So, I don't "buy" the concept that there's nothing worth owning because everything's expensive… Especially if others are going to hand me a few down days on a silver platter courtesy of their tax-related sales.

Ultimately, there's no hard and fast rule when it comes to identifying tax loss selling, and X very rarely marks the spot when it comes to timing the markets. So you've got to use a little judgment.

You've also got to be conscious of the fact that avoiding the tax man is one of the oldest games going and that it usually occurs late in the year when everybody focuses on what they should have been doing all along…

…buying quality companies with solid management, solid products, and even more solid upside potential.

Join the conversation. Click here to jump to comments…

About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and Strike Force, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.

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  1. H. Craig Bradley | December 10, 2013

    Is Yanzhou Coal Mining Co. Ltd a Good Deal ?

    I find this coal company attractive on the long term energy outlook for a growing China, but in at least the intermediate term questionable because: 1.) Their earnings are obviously down, 2.) The P/E for this stock (ADR) is 35 at a time when emerging markets have tanked during a "global slowdown". 3.) Its hard to justify a stock that is not growing at 30% (growth stock) with such a high valuation, and 4.) They have cut their dividend rate this year in order to conserve cash, 5.) Some of their mines have seen operations reduced or even closed due to lack of global demand.

    In short, the stock appears overpriced. In the words of one professional institutional investor in Great Britain about investing in ANY stock in a world influenced by global QE's:

    "…we only see advantage in favouring the ownership of businesses that offer compelling VALUATIONS to prospective investors"

    • Keith Fitz-Gerald | December 11, 2013

      Good morning Craig.

      You raise some excellent and very valid points – thanks for taking the time to write!

      I believe that the longer term prospects associated with China's growth overwhelm many of the classic metrics, especially when it comes to Chinese resource companies like Yanzhou. The other thing to remember is that the west continually applies its own metrics to a system where the numbers don't necessarily match up. So, in this case, I am not especially bothered by the otherwise high PE even though many classically trained investment professionals disagree. If Yanzhou does, in fact, head lower, I hope I'm smart enough to keep buying.

      All the best regards for a great day,

      Keith

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