Today I roll out the first tranche of my 2023 Tax Loss Selling Recovery Portfolio. The idea is to identify potentially cheap names that were down sharply in 2022 and might be pushed even lower at year-end as market participants book losses for tax purposes, but could recover in 2023 if selling pressure subsides. The objective is to outperform the S&P 500 and Russell 2000 indexes. This strategy worked well from 2018 through 2021, but not in 2022.
Here are the criteria for inclusion:
- 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 of $100 million
Just like last year, I've taken small positions in each of these names.
Here are the first four:
This one is a big surprise; not that fact that it made the list of candidates, but that I am selecting it for inclusion. Meta Platforms (META) (down 67% year to date) has had a horrendous year. It's a name I've never owned or wanted to own, so this is a first. Meta has its share of challenges, but no longer trades like the cult-stock growth story it once was at 14x and 12x 2023 and 2024 earnings, respectively. META ended its latest quarter with $41.8 billion, or about $15.50 a share, in cash and marketable securities and $10 billion in debt.
I've owned eBay (EBAY) (down 33%) in the past, specifically coming out of the 2008-2009 market meltdown. Shares of eBay currently trade at about 11x and 9x 2023 and 2024 consensus estimates, respectively. EBAY topped out above $80 in October 2020 and has been sliding most of the time since, closing Friday just above $45. The company has bought back a lot of its stock over the years, reducing shares outstanding from 1.2 billion at year-end 2015 to 548 million at the end of the most recent quarter. It instituted a dividend in 2019 and currently yields 1.95%.
Qualcomm (QCOM) (down 34%) trades at 12x and 10x 2023 and 2024 consensus estimates, respectively. Talk about profitability -- net profit margins were 29% in 2022 and 27% in 2021. Qualcomm currently pays a 75-cent quarterly dividend, which equates to a 2.4% yield. In addition, the dividend has grown at an 11.6% clip over the past 10 years (compound annual growth rate), quietly making QCOM a dividend champion of sorts.
Last but not least for the first tranche is Ford Motor (F) (down 35%). Ford trades at 8x and 7x 2023 and 2024 consensus earnings estimates, respectively. Ford stock started 2022 with a bang, eclipsing $25 in mid-January, but it has been rough running ever since. Ford shares closed at $14.08 last Friday. Ford currently yields 4.3%.
This is a first for my Tax Loss Selling Recovery Portfolio, four larger household names. The next two tranches likely will be dominated by smaller names.
(F is a holding of Action Alerts PLUS. Want to be alerted before the portfolio buys or sells these stocks? Learn more now.)
