While we are still about 10 weeks removed from year-end, I am already in tax loss selling mode, thinking about this year's losers that may selloff further into year-end. They can make for interesting purchase candidates, as the sellers, who put great pressure on these names late in the year to take tax losses, potentially become buyers in the New Year.
The criteria are very simple (and can certainly be honed to fit your personal investment biases):
- down at least 30% year to date,
- forward price earnings ratios below 15 in the next two fiscal years
- minimum market cap $100 million
Currently, more than 100 companies make the cut, a number that will change as we get deeper into the year. But it is certainly an interesting mix.
There are a few names from a variety of my preferred deep value screens, including Ultra Clean Holdings (UCTT) (-50%), Tutor Perini Corp (TPC) (-31%), and Cooper Tire & Rubber (CTB) (-30%).
More recognizable and somewhat mainstream current qualifiers include American Airlines (AAL) Tupperware Brands (TUP) (-47%), Whirlpool (WHR) (-35%), Applied Materials (AMAT) (-33%), Goodyear Tire & Rubber (GT) (-35%), and Winnebago (WGO) (-40%).
There are just a handful of current retail qualifiers including L Brands (LB) (-47%), Bed Bath & Beyond (BBBY) (-30%), Michaels (MIK) (-33%), and Smart & Final Stores (SFS) (-33%).
There is also a name that also made the list last year- a distinction that no company would welcome- as Newell Brands (NWL) (-32%) continues to endure rather severe punishment. Down another 6.5% Thursday, the company now yields 5.5%, and trades at 7 X next year's consensus estimates.
A few others that currently make the cut include United Natural Foods (UNFI) (-39%), Kronos (KRO) (-35%) which currently yields 4.6%, Groupon (GRPN) (-31%), Huntsman (HUN) (-30%), and Federated Investors (FII) ( -31%).
This is simply a preview, the list will likely change in light of upcoming midterm elections, the plethora of geopolitical events currently in play, as well as any surprises from the Federal Reserve. The one thing to keep in mind about this list is that it does have a forward price earnings threshold of 15, which means that all of the qualifying names are expected by analysts covering them to be profitable for the next two years. Running the screen without that qualifier would likely yield a plethora of additional names.
As year-end draws closer, I will continue to hone this list, and as I have the past couple of years, will name what I believe to be the most interesting candidates, for better or worse ( and there will likely be some of both).
