NewEdge's McDonald: Look for This Year's Market Losers to Be Next Year's Winners

Friday, 29 Nov 2013 03:44 PM

By Dan Weil

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The best way to invest for next year is to go for what tanked this year, says Larry McDonald, chief equity strategist of NewEdge brokerage.

"We look for stressed sectors toward year-end, especially with the S&P 500 up" 29 percent this year, he told CNBC. "People in December have to sell their losers."

That worked well for NewEdge late last year, when it bought First Solar, Best Buy and Hewlett-Packard. "They were up 50, 60 percent in the first half of this year," McDonald said.

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Now he's looking at home builders, including Hovnanian Enterprises. "They've underperformed in the last six months," he said. Hovnanian stock dropped 7.7 percent over the last year.

"But the gold miners and coal stocks are the [true] dogs," McDonald said. Battered mining and coal stocks include Newmont Mining, Cliffs Natural Resources and Peabody Energy.

Newmont plunged 45.7 percent over the last year, Cliffs Natural Resource plummeted 14.5 percent and Peabody slid 24.2 percent.

Overall, most stock strategists are cautiously bullish for next year, with a Bloomberg poll of 13 strategists producing an average year-end target of 1,890 for the S&P 500. That's a 4.6 percent gain from Wednesday's close of 1,807.

John Stoltzfus, chief investment strategist at Oppenheimer, has a target of 2,014. "The basic premise is the economy continues to improve," he told USA Today. That will boost S&P 500 profits 5.5 percent next year, he predicts.

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