Friday, December 18, 2015

Tax Selling Rally Stocks for Year End

What is a tax selling rally stock? It is a stock that has dropped significantly during the year and is being severely beaten down at year end due to tax selling.

This is the time of year when investors are looking to take losses on stocks in order to offset any capital gains and even offset ordinary income up to the maximum allowed by the IRS. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

The selling pressure is substantially heavier at year end due to last minute selling compared to other parts of the calendar year, all other things being equal. Stock traders buy these stocks with the anticipation that when the selling pressure is off, the stock price will rise at the beginning of the new year (or possibly shortly before year end in a Santa Claus Rally).

So what stocks may be good opportunities? There are numerous stocks that have dropped over 75% this year but unfortunately, not all of them are generating earnings.

Of the ones that do have earnings, many of them fall in the oil and gas sector. These include:

Emerge Energy (EMES)
Pacific Drilling (PACD)
Seadrill Partners (SDLP)
Ultra Petroleum (UPL)

By the way, all of the above have price to earnings growth ratios [PEG] under 2 and price sales ratios [PS] under 2 also.

Stocks that have Taken a Dump

Other companies with the same drop in stock price and similar ratios, but in other industries include:

Christopher & Banks (CBK)
Iconix Brand (ICON)

Century Aluminum (CENX)

Intelsat (I)

Teekay LNG (TGP)
Teekay (TK)

Obviously, there is no guarantee that these stocks will move up in price when tax selling is over, but when selling pressure ends for anything, not just stocks, prices tend to rise. If you like interesting stock  lists like this, check out many of the free stock lists at

Disclosure: Author didn't own any of the above at the time the article was written.


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