It happens every year…
But almost no one notices.
Like clockwork, a small handful of stocks tend to make huge gains in January.
And investors who know what to look for can scoop up big profits to kick off the year.
So, why do most people miss these big moves?
Well, it’s pretty simple…
Not many investors are focused on the worst stocks of the year, which is exactly where these big moves come from.
The January Jump
I call this phenomenon “The January Jump.”
And the concept is very easy to understand.
You see, fund managers have to report their holdings at the end of each year.
That means their investors can see what stocks a mutual fund was holding as of Dec. 31.
And the last thing a manager wants is for new investors in the fund to learn they were holding “dogs,” or underperforming stocks.
So, just before the end of the year, managers tend to sell their worst performers.
This way, they are off the books for next year’s prospectus.
This causes the stocks that have performed the worst during the course of the year to sell off even further in December.
Tax Loss Selling
Adding to the decline is “tax loss harvesting.”
Investors will often “harvest” losses late in the year by selling poor performers and using those losses to offset taxable capital gains.
This selling makes “cheap” stocks even cheaper. And that’s where the value investors come in…
Remember… Not every player in the market is looking for growth.
Warren Buffett and his crowd are always looking for stocks that are on sale and trading for a low multiple of earnings or book value.
These value players often take advantage of the discounted prices and start buying.
See where I’m going with this?
The result is that the prior year’s “dogs” often get a big bump from new buying at the start of the new year.
See for yourself…
Do a Google search for “worst stocks of 2020,” and pull up a chart of each one.
You will see a big pop in the early part of 2021.
This phenomenon resulted in quick returns in Amarin Corporation plc (AMRN) during the first few months of 2021, as you can see in the chart above.
Yet, the stock was down a whopping 77% the year before!
There’s also PBF Energy Inc. (PBF), which was down 76% in 2020 but rallied a massive 163% during the first few months of 2021.
Tellurian Inc. (TELL), which was down over 81% in 2020, also staged a huge 215% rally during January 2021 alone…
And there are more than a dozen others…
So, if you want a good start to 2022, keep an eye on the worst stocks of 2021.
They could quickly reverse course and head much higher when January rolls around.
Embrace the surge,
Editor, Stock Surge Daily