It's that time again, tax-loss selling season. For the past few years, I've identified some names that were hammered during the year, that might recover in the New Year. Beaten-up stocks often face greater pressure heading into year-end as investors and institutions sell off some of their losers in order to offset gains. This year, after a solid year-to-date run for the markets, the ranks of candidates are a bit thinner. However, that means that there's likely a greater need this year for tax-loss harvesting. The screening criteria are very simple:
- down at least 30% year to date,
- forward price-to-earnings (P/E) ratios below 15 in the next two fiscal years
- minimum market cap $100 million
Last year there were more than 200 candidates, two and a half times what we saw the previous year. This year, there are just 70 or so at present. I again plan on naming the 12 that are most interesting (to me, anyway) and will roll them out four at a time. While I still tend to prefer smaller, more off-the-radar names, I will try and keep it balanced, between larger and smaller candidates.
Here is my first tranche of four names.
B&G Foods Inc. (BGS) , which manufactures and distributes dozens of shelf and frozen foods, is down nearly 43% year to date. This is a bit of an ugly story; B&G's stock currently yields nearly 11.5%, which may be the market's not-so-subtle way of predicting that a dividend cut is on the way. B&G trades at about 9.5x next year's consensus earnings estimates. It is a bit heavy on debt, as it ended last quarter with $2.1 billion, and $267 million in cash.
Talk about an ugly year: Tupperware Brands Corp. (TUP) has fallen off a cliff, down almost 74% year to date. Don't buy it for the 13% dividend yield that still may appear on some financial data sites; Tupperware suspended the dividend last month, so what you are seeing is old data. The stock was trading in the low $70s less than two years ago, but has been beset by falling revenue. While the market cap is just $400 million, around $1 billion in debt (less $86 million in cash) brings the enterprise value to $1.3 billion. Tupperware trades at 3x next year's consensus estimates. The question here is whether there are still a few puffs left in what apparently has turned into a cigar butt; in addition, the brand name may have some value to someone in an acquisition.
Because I am already on an all-ugly tangent, let's add GameStop Corp. (GME) , which is down more than 51% year to date. GameStop is not a long-term play (none of these are), but my speculation is that the story here is bad but perhaps not as bad as the market is making it out to be. GameStop trades at about 5x next year's consensus estimates. The video game retailer has been paying down debt, which stood at $419 million at the end of the latest quarter, and had ample cash of $424 million. GameStop also has been buying back stock, and at the end of last quarter still had $237 million on its repurchase authorization.
And I may as well throw an airline into the mix, that being Spirit Airlines Inc. (SAVE) , which is down 34% year to date. Spirit has put up a string of positive earnings surprises, yet is not loved by Wall Street. It is not as leveraged as one might think; it ended the latest quarter with $1.04 billion, or $15 per share, in cash and short-term investments and $2.36 billion in debt. SAVE trades for just under 8x next year's consensus estimates.
Stay tuned for Tranche 2.
