My 2018 tax loss selling rebound exercise continues to bear fruit early on in 2019. The objective, as in past years, was to identify names that had been hammered during the year, might be further sold off late in the year in order to offset gains, potentially setting them up for a rebound in the New Year.
Of course, besides being punished, qualifiers also had to exhibit some level of "cheapness" and meet the following criteria:
- Down at least 30% year to date,
- Forward price earnings ratios below 15 in the next two fiscal years
- Minimum market cap $100 million
The resulting list was then whittled down from 200 to 12, and released in three tranches of four names each in mid-December. Overall, since the first update, results have improved. So far nine of the 12 are in positive territory, and are up an average of just over 11%.
Tranche 1, released on 12/10 has perked up over the past month. Up an average of about 7% since, it's ahead of the S&P 500 (+2.7%) and Russell 2000 (+1.9%). Winnebago (WGO) (+24%) remains the overall leader so far, while United Natural Foods (UNFI) (-11.9%) is the laggard, but has picked up a little steam. Last week, the company garnered some headlines when it filed a lawsuit against Goldman Sachs (GS) and Bank of America Merrill Lynch (BAC) regarding advice those firms gave about the Supervalu acquisition; it appears as though UNFI may have overpaid, and in turn took on a lot of debt. Rounding out this tranche is General Mills (GIS) (+16.2%), and Kraft Heinz (KHC) (-2%).
Tranche 2, released on 12/12 is up 15% on average, again, better than the S&P 500 (+2.6%) and Russell 2000 (+4.3%). Groupon (GRPN) remains the winner so far (+23.5%); Kronos (KRO) has also staged a nice recovery (+20%). Hain Celestial (HAIN) (-3.2%) is still in modestly negative territory, while Bed Bath & Beyond (BBBY) (+20.5%) has rebounded about 25% over the past month. Much of that gain stems from a positive outlook issued by the company in early January - including earnings per share guidance of $2.00 for 2019 - with its third quarter results.
Tranche 3, released on 12/14 is up an average of 11.5%, also well ahead the S&P 500 (+2.1%) and Russell 2000 (+3.4%). Boise Cascade (BCC) is the leader here so far (+17%) while Methode Electronics (MEI) (+13%) and Skechers SKX (+14%) are not far behind. PetMed Express (PETS) (+1.6%) has given back some performance over the past month.
So far so good, but one of the true tests would be to see how these names performed in a down market.