What seemed like a worthy idea, identifying potential tax loss selling candidates late in 2017, with the notion that they might bounce in the New Year, has born some fruit. However, the results have been lumpy.
Just as in late 2016, I screened for potential candidates using the following criteria:
- down at least 30% year to date
- forward price earnings ratios below 15 in the next two fiscal years
- minimum market cap $100 million
While more than 80 stocks made the cut, I honed the list down to six, and revealed these names on December 11thand December 13th . While the six names are up an average of 8% since those columns ran, and have outpaced the S&P 500 (+.5%), Russell 2000 Indexes (+3.4%), the results are, for lack of a better word, lumpy. While last year's results were carried by one name, Weight Watchers (WTW) , this year's results were carried by two.
Wesco Aircraft Holdings (WAIR) (+61%) shook off its December lows, and took off (pun intended) after reporting better than expected first quarter revenue and earnings in early February. Restaurant name Dine Brands Global (DIN) (+50%), parent of IHOP and Applebee's, has also enjoyed a very solid run. Despite the company's upswing over the past four months, however, it trades at just 12X next year's earnings.
Dicks Sporting Goods (DKS) (+6%) was also in positive territory, but is still down substantially over the past year. It endured August's "retail Armageddon", when many specialty retailers were severely punished, but has not recovered nearly as much as some others. DKS is still down 35% over the past year.
From there, things got ugly. Grocery name Supervalu (SVU) (-27%) has continued to slide following the announcement of disappointing third quarter revenue. The specter of Amazon's (AMZN) presence in the grocery business continues to put pressure on the sector. An activist investor, Blackwells Capital, which owned about 4.35% of the company, launched a proxy fight in February as it seeks board seats, and pressures management to enhance shareholder value.
Dean Foods (DF) (-27%) has continued to sour (another pun intended), as pressures on the milk industry mount; last week, Goldman Sachs cut the name from "hold" to "sell", which pushed shares 9% lower last Monday.
Newell Brands (NWL) (-16%), is also in the midst of a proxy fight, as Starboard Value, which owns 3.8% of company, continues to exert pressure. Starboard does not believe that recent changes at the company, which include an agreement with activist Carl Icahn, and that includes four new independent board seats, goes far enough. This one could get interesting.