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    Stock picks for year-end 2019 and early 2020 from Bank of America - Business Insider

    Abstract:A strategy of owning these stocks has outperformed the market on average for several decades, according to Bank of America.

      The November-January period is historically the strongest three-month stretch for the stock market, on average, according to data compiled by Bank of America Merrill Lynch. The bank's equity analysts attributed this seasonal trend to a tax-related practice wherein mutual funds sell stocks into an Oct. 31 deadline.They also compiled a list of 16 stocks that may have declined due to so-called tax loss harvesting, but which possess the solid fundamentals to rebound in the months ahead.Click here for more BI Prime stories. The three months from November onwards have historically delivered the strongest returns on average for stock-market investors.That's according to equity strategists at Bank of America Merrill Lynch, who examined S&P 500 returns on a three-month basis going back to 1936. Since then, stocks have earned a 4.4% total return on average versus 2.9% for the index on a rolling three-month basis. Bank of America attributes this seasonal phenomenon — and the opportunity they foresee — to a tax-related practice that could reverse several beaten-down stocks in the coming months.The catalyst they pinpointed is tax loss selling, which involves selling securities that have lost money in order to offset the share of capital gains that is owed to Uncle Sam. Mutual funds are mandated by law to complete this practice by October 31.Now that the deadline is out of the way, BAML strategists are hunting for stocks that have been subjected to harsh selling, but which could rebound in the coming months on solid fundamentals. A strategy of buying such beaten-down names has performed well in the past. S&P 500 stocks that were down more than 10% year-to-date through October have subsequently outperformed by an average of 145 basis points in the following three months, according to BAML data going back to 1986.The list below contains stocks that meet this criteria for 2019. They are all buy-rated and declined by at least 10% through October 29.

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