Yes, it’s that time of year again… time to figure out which of your 2015 losers are the ones you want to go ahead and pull the plug on so you can at least derive some sort of benefit from them (a reduction in taxable income, in this case) rather than let them continue to eat away at your portfolio’s overall value.
And that is the real trick to the matter — determining which stocks to sell because they simply don’t have enough of a future to stick with then, or exercising patience in cases where a loser has a real shot at turning back into a winner.
Though certainly not an exhaustive list of names that would be better off sold rather than held, here’s a closer look at seven stocks to sell in calendar 2015.
Tax loss harvesting is the best thing these names have got to offer investors at any time in the foreseeable future.
Stocks to Sell: Whole Foods Market (WFM)
It’s not that consumers are likely to start eating poorly again, reversing a healthy-eating trend that has been underway (in earnest) for a few years now. Indeed, people are apt to eat even healthier in the foreseeable future, which would seemingly play right into the hand of Whole Foods Market (WFM).
Whole Foods Market is better dumped than held on to into 2016, though, as that craze has reached full maturity, leaving the grocer out of the picture thanks to the not-entirely-inaccurate perception that it charges premium prices for products available elsewhere at a cheaper price.
Case in point: Kroger (KR) has that look a heck of a lot like the aisles of a Whole Foods Market stores … except with better prices. That effort from Kroger is one of multiple reasons Whole Foods Market has seen .
In the meantime, the company announced it would be , largely to finance a major stock buyback.
What it really needs to do instead of restructuring its capitalization is to figure out why consumers are losing interest in it as a grocer. More cash doesn’t help answer that question, and until the question is answered, WFM is one of a handful of stocks to sell for tax loss harvesting after this year’s 40% pullback.
Stocks to Sell: Western Digital (WDC)
Credit has to be given where it’s due — the Western Digital (WDC) is a masterpiece, giving the enterprise market something it’s never had before, handling the heaviest of workloads any company could conceivably dump on it.
But, with an , it’s going to be of little interest to the average consumer, and even many enterprise level users will balk at the big jump in price for the not-quite-as-big jump in functionality.
Western Digital has struggled and will continue to struggle until it starts to become the standard disk-drive name in consumer devices like personal computers and tablets. With flash drives being the norm for tablets and phones, though — — Western Digital is barking up the wrong proverbial tree.
Yes, Western Digital just announced its SanDisk (SNDK) to resolve this very deficiency. It wasn’t a cheap buyout, though, and 2016 could be a turbulent one for the combined companies as they figure out how much or how little they want to integrate (and even continue competing with one another).
That dust will settle eventually, but it’s not going to settle soon enough to not put WDC on a list of stocks to sell for tax loss harvesting in 2015. It’s down 40% year-to-date.
Stocks to Sell: Macy’s (M)
Contrary to what it’s been trying to tell investors, Macy’s (M) isn’t facing a consumer-spending headwind. Macy’s shares are down more than 40% year-to-date because Macy’s created problems for itself — it forgot how to sell the right merchandise at the right price in the right way at the right time.
Retail spending in the U.S. is firmly up year-to-date … Macy’s just missed the boat. Don’t make the same mistake with M stock when you’re deliberating about tax loss harvesting.
Yes, Macy’s has a proverbial truckload of real estate it could monetize, either through an outright sale or through the conversion of those properties into REIT. That doesn’t actually solve the problem, however. Just ask Sears Holdings (SHLD) investors, who cheered when the company turned some of its stores into a REIT … and then jeered when they realized
those stores now have to start paying rent they hadn’t been paying before.
For Macy’s, were it to monetize all of its real estate, . It’s not going to sell of its real estate, of course, but the less property it sells or converts, the less working capital it will have … and it , down from more than a billion dollars in its war chest a year ago.
With no actual fix — e.g. selling more goods at better prices — in sight, M has also earned a spot on a list of stocks to sell before the end of the tax year.
Stocks to Sell: VMware (VMW)
The addition of VMware (VMW) to a list of stocks to sell for tax loss harvesting is likely to be a polarizing issue. Either investors love the idea of Dell acquiring EMC Corp. (EMC) — which happens to be the (vast) majority shareholder of VMware — or they hate it, fearful of the potential flood of VMW shares that might hit the market once the deal is consummated.
Indeed, it’s the uncertainty of what will transpire if and when Dell officially completes the deal that’s serving as an overhang. Some analysts think the 20% of VMW shares EMC doesn’t own .
Also weighing in on the stock is the fact that, while . A lack of clarity on who will control those rights after EMC and Dell hook up (or what Dell may dictate after it hooks up with EMC) has understandably kept any would-be buyers on the sidelines … and will continue to do so until questions are answered.
Perhaps more than anything, however, VMW is being hurt by the one-two punch of the problems it’s ignoring … and the ones it keeps bringing up. Not only are questions about the integration and potential synergies not being answered, the focal point in the meantime has turned to one of in an effort to make some of the combined companies’ books look better.
If VMware’s best growth ideas are merely accounting reconfigurations, the party’s over.
Stocks to Sell: CF Industries Holdings (CF)
Last but not least, fertilizer company CF Industries Holdings (CF) has been facing a headwind since 2013, with sales and earnings .
With agricultural chemicals largely expected to , don’t look for better operational numbers from CF Industries in 2016.
Knowing big hurdles remain on the horizon, CF had been mulling a tax inversion of its own, not unlike the one recently announced by Pfizer (PFE) Allergan (AGN). Specifically, the buzz was that CF Industries was eyeing Dutch fertilizer outfit OCI as a means of lowering its corporate tax rate.
Now though, with the U.S. Treasury finally putting the brakes on inversion deals, that deal’s upside has largely been taken off the table.
Citigroup analyst P.J. Juvekar , stating that it…
“1) Places limits on U.S. companies combining with foreign companies using a new foreign parent located in a “third country,” 2) Limits the ability of U.S. companies to bypass the 80-percent ownership rule (in the proposed deal, CF would own ~72% of the new company and OCI ~28%); and 3) Requires the new foreign parent to be a tax resident of the country where it is created or organized. Additionally, and retroactive to 2014, the IRS will limit the benefits of transferring assets to foreign parent companies tax-free.”
With that as the new backdrop, the 16% loss CF shares have suffered so far this year makes it one of the better stocks to sell for anyone who may also benefit from tax loss harvesting in 2015.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
