EOFY stock watch. Watch your winners vs sell your sinners?

Jessica Amir joined discussion · Jun 24, 2024 14:37

This week global markets will focus on end-of-quarter and half-year rebalancing ,while in Australia its end of financial year (EOFY). This seasonal event can cause stock volatility but also presents opportunities for investors.

Rebalancing and portfolio optimization

During EOFY, half-year,and quarter-end,investors and fund managers rebalance their portfolios.This may involve trimming overperforming stocks ("winners") and potentially selling losing positions ("sinners") to claim tax deductions (tax write-offs). Alternatively,they might buy underperforming stocks to realign their portfolios with their target asset allocation.

Opportunities for savvy investors

Opportunistic traders and investors can use this time to position their portfolios for the next 6-12 months.They might consider companies with strong revenue growth outlooks while also factoring in another layer of seasonality. Historically, markets tend to perform well in July, with the S&P 500 typically rallying 1.3% as capital is reinvested after being withdrawn in May and June.

Stocks to Watch

Potential for Profit Taking: Keep an eye on stocks that could experience price drops due to profit taking.In the US,this includes high performers like SMCI $Super Micro Computer (SMCI.US)$ (+311%),Vistra $Vistra Energy (VST.US)$ (+245%),and Nvidia $NVIDIA (NVDA.US)$ (+194%) over the past year.On the ASX, watch Red5 $Red 5 Ltd (RED.AU)$ (+132%), Life360 $360 $Life360 Inc (360.AU)$ (+122%), and Pro Medicus $Pro Medicus Ltd (PME.AU)$ (+115%).

Underperforming Stocks:These stocks might face further pressure or attract "bottom feeders" buying at a discount.In the US,examples include Albemarle $Albemarle (ALB.US)$ (-58%),Paycom $Paycom Software (PAYC.US)$ (-52%), and Walgreens $Walgreens Boots Alliance (WBA.US)$ (-49%). On the ASX,consider Liontown $Liontown Resources Ltd (LTR.AU)$ (-68%) ,IGO $IGO Ltd (IGO.AU)$ (-62%),and Star Entertainment $The Star Entertainment Group Ltd (SGR.AU)$ (-52%).