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Tickers in this Article: EMXX
Insiders in the natural resource business often talk about "shopping season" this time of year.

But they're not referring to Christmas presents.

As I've discussed before (see "The Little-Known 'Glitch' That Could Lead To 53% Gains), this is the time of year when many natural resource investments can be had at bargain prices. 

This is particularly true for the smaller firms that my premium natural resource newsletter, Junior Resource Advisor, was created to focus on -- the kind of companies that offer potential for double- or even triple-digit gains through the discovery of major mineral or petroleum deposits.

This month's buying opportunity is upon us -- ironically -- because 2013 has been a difficult year for many resource companies.

With commodities prices falling, a large number of firms have seen their share prices decline. Sentiment has in fact turned down to such a degree that many of these firms are selling for cash flow multiples lower than we've seen in decades.

I've been purchasing a number of these companies for my portfolio over the past few months. One such company I recently told my Junior Resource Advisor subscribers about is selling for less than twice its after-tax income.

The thing is, today we're seeing even better prices on these already-cheap companies.

That's because many holders of these stocks are dumping them indiscriminately right now.

Many of the junior resource companies I tend to follow are listed in Canada -- the center of the universe when it comes to raising capital for small mining and oil and gas companies.

And Canadian investors have some unique tax incentives that come into play this time of year, affecting not only Canadian-listed companies but also firms that have cross-listings on U.S. exchanges.

But let me be clear: You don't have to live in Canada to take advantage of the bargains created by this phenomenon.

Here's how it works.

This time of year, Canadian investors sitting on stocks that have seen losses will often sell them for one reason alone -- to book the investment loss and claim it against their taxes. In many cases, the same sellers will buy the exact same stocks after the New Year. They simply need to crystallize their losses during the current tax year.

The Year-End Insider 'Secret' That Could Make You 12.8% -- Or More 

This means they can afford to sell at almost any cost. It's a phenomenon that leads to tremendous selling pressure -- temporarily driving stocks to unbelievably low levels without any regard for the business fundamentals or cash flows of these companies.

Buying this disconnect has been a money-making strategy among industry veterans for decades. During the past four years when the resource-heavy TSX Venture exchange finished with a loss, if you'd bought the index during the second week of December, you would have made an average 12.8% return over the next 30 days -- as beaten-down companies rebounded from temporary tax-loss selling pressure.

This year saw similar declines. The index came into 2013 at around 1,200 and today sits around 900 -- a loss of 25%. And many of the index's component companies have seen losses even deeper than that. 

When investors are facing these kinds of losses at year-end, tax-loss selling usually sets in hard and fast. And this is creating great bargains for savvy buyers in the process.

This Year's Best Tax-Loss Buys
The biggest bargains for tax-loss season are in the mining sector this year.


This is simply because metals prices are down -- having dragged many of the stocks with them. Oil and gas, by contrast, have been buoyant. You can see from the chart below that the TSX Global Gold Index is down by 50% in 2013.



Starting with my own portfolio in Junior Resource Advisor, I can see two mining stocks that look like good tax-loss buys right now. But in addition to those, there are a number of other good-quality stocks showing typical tax-loss "dips" in their share price.

Just look at the chart below for Eurasian Minerals (NYSE: EMXX). You can see the steep slide in the share price over the past few weeks -- making this company over 30% cheaper. In fact, Eurasian is now trading near the lows the firm saw during the depths of the 2008 financial crash.



This sell-off has nothing to do with Eurasian's fundamentals. The company holds one of the best and most diversified portfolios of mineral exploration and development properties on the planet. It's got a strong cash position of almost $15 million. It even owns royalties on producing mines that pay it a steady income stream of $2 million to $3 million yearly.

Eurasian is a company I've been considering adding to my portfolio in Junior Resource Advisor. I may do so over the coming months -- but for those looking to buy a great stock at a discount price, now could well be the time to pick this one up.

A few other stocks around the Canadian resource space also look like good short-term trading opportunities. These are not firms I'd necessarily hold in Junior Resource Advisor, but rather ones that could get a quick jump once tax-loss pressure abates.

I'm going to use tax-loss weakness as a chance to add to my portfolio positions. In fact, I added a combined 3,000 shares to two of my holdings on December 11.

For those investors considering tax-loss trading ideas (including Eurasian Minerals and others), look for a bounce through the second and third weeks of January -- the typical timetable for gains on these beaten-up stocks. 

 

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