MLS discussion thread

Common Sense
The School of Hard Knocks



By James B. Stewart
December 30, 2003

WITH THE STOCK MARKET about to record its best year in the past five, and with everyone in a holiday mood, it might seem an odd time to be focusing on your losing investments. But when you think about it, what better time? Plus, Uncle Sam helps ease the pain by giving you a nice big deduction if you sell and realize a loss by Dec. 31. So why not whip up some eggnog, settle in by the fire, open your portfolio, and try to enjoy this.

As I gaze down the list of stocks in my taxable account, I see that the good news is that the number of losing positions has shrunk dramatically, thanks to this year's rally and last year's tax loss selling. And not one of those still sitting there dates from 2003, which means I made no losing purchases this year. That's a pleasant surprise. I'd like to attribute it to my investing acumen, but it's also true that a rising tide lifts all ships.

But now for those losers. Naturally, I'm looking to see if I should realize some tax losses. But at the same time, it's a good exercise to see if I should increase my position. After all, if my investment thesis hasn't changed, I'm getting the same stock at a cheaper price. I find I'm often better off buying the losers than I am chasing the winners.

Cytyc (CYTC) is an investment I have only myself to blame for, having recommended the company in SmartMoney magazine as one of the 10 stocks for the next decade. Cytyc is also a repeat loser, having been on the list last year, when I added to my position. Buying more has actually helped limit my losses to under 20%; the stock is up 33% this year. I still like Cytyc, which makes medical diagnostics and has the lion's share of sales of pap smear tests for cervical cancer. Though its proposed merger with Digene (DIGE) was scrapped for antitrust reasons (and the stock got slammed), the European Union just approved the company's newest pap smear test. This is a lonely positive view, however.

Not one Wall Street analyst rates Cytyc a Strong Buy.