In my previous column I rolled out the first four tax-loss selling rebound candidates for 2020. Now I'll unveil four more.
As I've stated in past years, not all these names -- and perhaps none of them -- will bear fruit. In some years that I've conducted this experiment, there was a name or two that soared, some that were flat, and others that did not recover, or worse. The hope is that the big winners far outstrip the losers, which has been my experience so far.
All these companies have been hammered to a varying degree during the year but trade at reasonable forward valuations. The theory remains that these stocks may face additional pressure as we approach year-end and investors engage in tax-loss harvesting before each gets a potentially fresh start in 2020. This is not intended to suggest that any of these names are long-term buys, but rather that their short-term punishment may not fit the crime.
The Gap Inc. (GPS) (down 36% year to date) has lost more than one-third of its market cap in a year that the S&P 500 has risen 27%. That puts an awful year into perspective, but then again. this is a retailer, and one with an uncertain future. After a first-quarter miss where much of the damage was done, The Gap has reported two consecutive quarterly surprises. Trading at just under 10x next year's consensus earnings estimates, The Gap yields 6%. The company ended its latest quarter with just under $1.1 billion in cash and short-term investments and $1.25 billion in debt (excluding operating leases).
Fertilizer name Mosaic Co. (MOS) (down 36% year to date) has been on a downward trajectory for years and currently trades at a 15-year low. Low fertilizer prices are the big culprit here; Mosaic missed badly on the past two quarterly earnings releases. Mosaic shares trade at just under 13x next year's consensus earnings estimates and just 0.85 X tangible book value. There is considerable debt on the books -- $4.7 billion as of the latest quarter -- and $641 million in cash.
TripAdvisor Inc. (TRIP) (down 39.5% year to date) has not gotten much love from investors over the past year. Much of the damage was done last month after TripAdvisor reported worse-than-expected third-quarter earnings and its shares fell 22% on Nov. 7. TripAdvisor also missed second-quarter estimates. Trading at 15x next year's consensus earnings estimates, TripAdvisor ended its latest quarter with $933 million in cash and short-term investments and just $84 million in debt. That liquidity will be tempered by a special cash dividend of $3.50 a share the company recently announced; it also increased its share repurchase authorization to $250 million. (I would rather have seen TripAdvisor put that special dividend -- totaling about $490 million -- into share buybacks; it might have shown some confidence from management.)
Last but not least for Tranche 2 is Fluor Corp, (FLR) (down 49% year to date), which is trading at 17-year lows. Fluor had two big stumbles this year. The first was in May after a horrendous first-quarter earnings release that saw shares fall 24% on May 2. The second was in August, when shares gave back another 27% after bad second-quarter results. Fluor trades at 10s next year's consensus earnings estimates and yields 2.5% -- another case where you need to be careful of reported financial data as the company recently cut the quarterly dividend from 21 cents to 10 cents. Some financial sites are still reporting the dividend yield based on the higher dividend. Fluor ended its latest quarter with $1.85 billion, or $13 per share, in cash and short-term investments and $1.7 billion in long-term debt.
Stay tuned for Tranche 3, which will be rolled out next week