Sean Udall Talks The 'January Effect' With PreMarket Prep Plus

Sean Udall joined PreMarket Prep Plus on Friday to talk about the "January Effect": the tendency for some stocks to rise in the first month of the year following a year-end sell-off for tax purposes.

In his opinion, there has never been a greater year of tax-loss selling than what is occurring in 2021.

A Year Like No Other: Udall, a tech stock strategist and publisher of The Udall Report, was a guest on the PreMarket Prep Plus Show to share some issues that may benefit from the “January Effect.”

He was not surprised to see the year end the way it did. The reason is that earlier in the year, investors on margin reached record levels, and many were invested in growth stocks with price-to-earnings ratios that turned out to be unsustainable.

With many of these issues being cut in half or even more in some instances, many investors waited until the end of the year to sell to offset other gains in their portfolio.

Bigcommerce Holdings Inc BIGC: Udall discussed the price action following its third-quarter beat.

The issue, which was already trading at a third of its all-time high ($46 from $162), had a solid three-day rally off its better-than-expected third-quarter report ($45.85 to $62.74) on a closing basis.

Following the report, the issue gave it all back and then some. In fact, the issue is right near its all-time low ($34.50) as it changes hands at $35.50 as of noon.

What is puzzling to Udall is there has not been any bad news on the issue since. Instead, it may be falling victim to vicious tax-loss selling that is taking place, he said. 

Robinhood Inc. HOOD: Udall described the issue as the “poster-child for everything that went wrong this year.”

At the height of “meme mania” and a spectacular rally in Bitcoin BTC/USD, the attraction of free trading was a way to get rich quickly.

Unfortunately, many of those retail investors made poor choices, including buying shares of Robinhood, which has been in a steep downtrend shortly after the ridiculous rally off its IPO. Once the tax-loss selling abates, the issue may rally if the fundamentals of the company improve.

Motorsports Games Inc. MSGM: Udall put the issue in the “feast or famine” category. The motorsport network company, which combines engaging video games with esports competitions and content for racing fans and gamers around the globe, has been annihilated since its IPO.

The issue, which made its debut in January, immediately peaked that month at $38. It reached $2.77 on Wednesday, and it is not far off that low.

Once again, this issue falls into the “not really having bad news” category. Udall pointed out that it does not have much revenue, The company does have a deal with Formula 1 that could be out in the next year or two, he said. In addition, the company already has a "NASCAR Heat 5" racing video game simulating the 2020 NASCAR season.

The entire discussion with Udall from Friday’s PreMarket Prep Plus show can be found here: