My 2022 Tax Loss Selling Recovery Portfolio is based on the theory that stocks down sharply in a given year may face selling pressure at year-end as investors offset capital gains with losses. In the waning days of 2021, I thought it might be interesting to see how this year's portfolio is faring early, just over three weeks since inception.
One of the elements to this theory of buying last year's losers has to do with timing, and admittedly, I have not done much analysis there yet. This year and in past years, I've started the portfolio in early December.
So far, so good, as the latest version of the portfolio is up 7%
By way of reminder, here are the criteria for inclusion:
- Down at least 20% year to date
- Forward price-to-earnings (P/E) ratios below 15 in the next two fiscal years
- Minimum market cap of $100 million
Tranche 1, released on Dec. 6, is up 9.2% versus 2.1% for the S&P 500 and 2% for the Russell 2000 Index. Three of the four names are in positive territory, with Activision Blizzard (ATVI) (up 11%) doing the heavy lifting so far. ATVI now trades at about 17x next year's consensus earnings estimates. Restaurant name Brinker International (EAT) is up about 6% and trades at 8x 2023 (June) consensus earnings estimates. The remaining names in this tranche, Altice USA (ATUS) (down 2%) and Diebold Nixdorf (DBD) (up 2%), are holding their own.
Tranche 2, released on Dec. 8, is up 4.8% versus 5.5% for the S&P 500 and 1.9% for the Russell 2000. Groupon (GRPN) (up 25%) is the best performer so far in the entire portfolio. Shares rose 23% from Dec. 16 to Dec. 22, perhaps in part due to a report from Prescience Point, which indicates the belief that GRPN is undervalued and may be worth between $63 and $98 a share. Viatris (VTRS) (up 10%), SelectQuote (SLQT) (up 3%) and Tupperware Brands (TUP) (down 2%) round out this tranche.
It is early for sure and there is a long road ahead for this portfolio of 2021 losers, though it would be a tall order to duplicate last year's results. The hope, though, is that along the way more is learned about what exactly might make this concept a success or failure.