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Nov. 6, 2021, 10:42 a.m. EDT

Put these 10 stocks on your radar because they may rebound from recent tax-loss selling

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By Michael Brush

Big investors just finished their tax-loss selling. So it’s time to root through the wreckage to find bargains to buy.

This trade consistently works well because mutual funds and other large investors have to realize their tax losses by Oct. 31. After that, the stocks that they hammered tend to outperform.

By how much?

Since 1986, S&P 500 /zigman2/quotes/210599714/realtime SPX -1.84% stocks down more than 10% in the first 10 months of the year (the top tax-loss selling candidates) rose 5.6% over the subsequent three months, according to Bank of America. That’s 1.6 percentage point outperformance relative to the S&P 500’s average return of 3.9% during the same time.

After tax-loss selling, these stocks can get a boost from seasonally bullish market tailwinds. During Nov. 1 through Jan. 31, the S&P 500 has averaged 4.5% gains since 1936, compared with 2.9% for all other rolling three-month periods, says Bank of America.

Read: Biotechnology stocks have been tax-selling losers this year

Institutional investors have been big sellers of stock in recent weeks, and they’ve leaned heavily on their tax-loss selling candidates. To find the best bargains, Bank of America screened the S&P 500 for stocks with year-to-date (YTD) declines greater than 10%. Then the bank suggested clients consider the 13 it has buy ratings on. That list includes Global Payments /zigman2/quotes/201234787/composite GPN -2.29% , Viatris /zigman2/quotes/209413137/composite VTRS -1.05% , Incyte /zigman2/quotes/204510994/composite INCY +0.17% , Qualcomm /zigman2/quotes/206679220/composite QCOM -5.21% and T-Mobile /zigman2/quotes/204659678/composite TMUS -1.48% .

Insider list

I’ll take a different approach. I’ll favor names that are down a lot where insiders were recently buying a meaningful amount of stock — based on my system of analyzing insider purchases at my stock letter Brush Up on Stocks. (You can find the link to my letter in the bio below.)

The significant insider buying suggests that business trends will support stock gains from early November and beyond. I recently suggested 22 of these names in my stock letter. Here are five to consider.

Intel /zigman2/quotes/203649727/composite INTC -1.69% ; recent price: $48.25

Stock decline : -3.1% YTD; -29.5% from 2021 high

Latest insider purchase : 10/25/21

Yield : 2.9%

Intel stock cracked in late October even though the company posted decent results and beat estimates, thanks to sales strength in data centers, the so-called Internet of Things and Mobileye (self-driving cars). The problem: Intel announced aggressive capital spending that will hurt margins.

Personally, I like companies that invest in their future, especially when the news makes their shares cheaper. Insiders agree, given their large buying. The Intel stock decline this year means virtually anyone who bought in 2021 has a losing position. No doubt many of them were selling in late October to realize tax losses, compounding the stock weakness caused by the bullish capital-spending news.  

MercadoLibre /zigman2/quotes/200678442/composite MELI -1.96% ; recent price: $1,512

Stock decline : -7.8% YTD; -23.5% from 2021 high

Latest insider purchases : 8/18/21

Yield : None

This online retailer in Latin America is having a good year. Sales were up over 100% in the second quarter compared to the year before. Its user base grew 47% to 75.9 million shoppers. The stock has soared into the $1,800 to $2,000 range twice this year. But it’s been weak lately, along with a lot of large-cap tech. Anybody who bought the spikes this year was down quite a bit in late October and probably selling to reap tax losses.

/zigman2/quotes/210599714/realtime
US : S&P US
4,577.11
-85.74 -1.84%
Volume: 2.74B
Jan. 18, 2022 4:56p
loading...
/zigman2/quotes/201234787/composite
US : U.S.: NYSE
$ 147.10
-3.45 -2.29%
Volume: 2.24M
Jan. 18, 2022 4:00p
P/E Ratio
46.36
Dividend Yield
0.68%
Market Cap
$43.68 billion
Rev. per Employee
$344,166
loading...
/zigman2/quotes/209413137/composite
US : U.S.: Nasdaq
$ 15.06
-0.16 -1.05%
Volume: 7.73M
Jan. 18, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
3.19%
Market Cap
$18.41 billion
Rev. per Employee
$381,018
loading...
/zigman2/quotes/204510994/composite
US : U.S.: Nasdaq
$ 75.01
+0.13 +0.17%
Volume: 3.06M
Jan. 18, 2022 4:00p
P/E Ratio
31.14
Dividend Yield
N/A
Market Cap
$16.54 billion
Rev. per Employee
$1.64M
loading...
/zigman2/quotes/206679220/composite
US : U.S.: Nasdaq
$ 178.86
-9.83 -5.21%
Volume: 10.48M
Jan. 18, 2022 4:00p
P/E Ratio
22.73
Dividend Yield
1.52%
Market Cap
$211.33 billion
Rev. per Employee
$745,911
loading...
/zigman2/quotes/204659678/composite
US : U.S.: Nasdaq
$ 106.91
-1.61 -1.48%
Volume: 4.96M
Jan. 18, 2022 4:00p
P/E Ratio
39.96
Dividend Yield
N/A
Market Cap
$135.55 billion
Rev. per Employee
$1.06M
loading...
/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 54.76
-0.94 -1.69%
Volume: 35.33M
Jan. 18, 2022 4:00p
P/E Ratio
10.63
Dividend Yield
2.54%
Market Cap
$226.53 billion
Rev. per Employee
$709,530
loading...
/zigman2/quotes/200678442/composite
US : U.S.: Nasdaq
$ 1,100.75
-21.99 -1.96%
Volume: 461,850
Jan. 18, 2022 4:00p
P/E Ratio
691.69
Dividend Yield
N/A
Market Cap
$56.65 billion
Rev. per Employee
$403,058
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