12/11/12 9:42 AM – Year-End Sale on Selected Stocks

A quick look at a chart of the US stock market compared to Europe and emerging markets will tell you that the foreign markets have continued on an upward path this 4th quarter while the U.S. has been down. Now, the U.S. market hit its low for this quarter exactly at the midpoint – Nov. 15 and since has been going up in tandem with foreign markets but still has several percent to gain to catch back up with them.

News about growth in Europe and Asia has not gotten any better; in fact, it has been slightly worse. I don’t even think even the Fiscal Cliff fiasco has been dragging markets down because the least hopeful time for a deal to get done is probably now and the US is up the last five days in a row.

Simply put, many people have gains in their stocks since 2009 and some gains have been large. With the tax rate on long-term capital gains almost certainly going up at year-end, many individual investors, mutual funds, hedge funds and other institutions have been taking profits. You can tell that by seeing which stocks have declined the most – they are the biggest winners over the last one to three years.

That spells opportunity because many of these stocks are America’s best companies and they are on sale both compared to the rest of the world and to the U.S. market itself.

No stock exemplifies that better than Apple (AAPL), which was up nearly 700% from early 2009 and 75% just from January to September. Since then, it has declined 25%. The mall is not the only place you can find a 25% off sale right now.

Of course, some stores, like jewelers, have things marked up too much to begin with and the sale is not always a bargain. Apple’s price also got ahead of itself, not based on normal measures of value but just because just about every institution on Wall St. owned Apple until recently because the stock was having a huge effect on the indexes against which these institutional investors are measured. They had to owwn AAPL to keep up. Others bought it out of greed.

Now, much, if not all the selling to undo oversize positions and to lock in 2012 tax rates is probably about over. There are only 8 1/2 market sessions left in the year for trades to settle in 2012. I would take a hard look at some great companies on sale, starting with Apple.

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