Tax loss selling season

Tax loss selling is back in season and this year has been a recipe for a strong dose.  When the market is broadly up, a greater portion of participants will have gains they need to wash.  Given how broad the market expansion has been, there are fewer available stocks in which to take losses.  Thus, those that are down are potentially in for a rough ride.

CBL preferreds have taken another leg down and we suspect this is largely a tax loss selling move.  We see a trick that can be deployed here to provide some tax relief without giving up one’s positioning.  If one owns CBL-E they can sell those shares and use the proceeds to buy CBL-D and similarly, those who own CBL-D can sell it to buy CBL-E.  This allows full capture of the tax loss with which one can wash gains while preserving the upside of holding the position.  The spread between the D and E fluctuates a bit so one has to be cautious in both timing and execution.

WPG seems to be getting hit with a similar wave of tax loss selling.

Uniti has not yet been hit by tax loss selling and I suspect this is because the tax loss selling pressure has been offset by favorable fundamental news.  The judge has moved up the deadline for WIN to file its plan for emerging from bankruptcy to April when WIN had previously wanted it to be June.  This reduces the timeframe of uncertainty.

Rising rates

The 10 year Treasury yield has risen substantially in recent weeks to over 1.9%.  The triple net REITs have fallen in the market’s response.  This is making GOOD attractive again as it has fallen close to $22.  We may consider getting back in if the favorable pricing remains.  MGP has also been held back by the rising rates as the long duration of its contracts causes it to be viewed as a bond substitute.

2CHYP Portfolio Snap Shot

2CHYP Performance: inception through end of November, 2019

2CHYP Weekly Trade Confirmation Report:  No trades this week