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TIME FOR A TAX LOSS SELLING BOUNCE

Tax loss harvesting, the process of selling some investments at a loss in order to offset gains in others, became increasingly widespread among institutional investors following the Tax Reform Act of 1986 and now may be the time for stocks sold under the strategy to bounce, according to Savita Subramanian, equity and quant strategist at BofA Global Research.

The law mandated October 31 as the cut-off date for most mutual funds to realize gains and Subramanian said in a recent note that the firm's client flow data shows that institutional selling usually reaches its apex in October.

Subramanian notes that "tax loss candidates," or stocks down 10% or more from January to October have historically bounced back in November, outperforming 70% of the time from November to January by 1.7 percentage points on average.

Some of the stocks that Subramanian says could outperform on solid fundamentals after being temporarily depressed by tax loss harvesting include Chipotle Mexican Grill CMG.N, Adobe ADBE.O, Salesforce CRM.N, Colgate-Palmolive CL.N, Ameriprise Financial AMP.N and Starbucks SBUX.O.

(Chuck Mikolajczak)

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