A handful of stocks have been noticeably absent from the 2024 rally, and they might see further declines as investors jettison their losing positions to save on taxes, Wolfe Research found. Even as the major averages have stumbled to start September, they’ve already posted solid gains for the year. The S & P 500 is up 15% in 2024, benefiting from a surge in the information technology sector amid excitement around artificial intelligence. September kicks off a pivotal period for investors: As the year winds down, they dump big losers in their portfolio in a bid to realize capital losses and use them to offset capital gains and save on taxes. “Historically, avoiding the biggest year-to-date losers has been a positive alpha generating strategy heading into the last several months of the year,” wrote Chris Senyek, chief investment strategist at Wolfe, in a Tuesday report. “The reason is that the market’s biggest laggards can be subject to selling pressures by investors looking to harvest capital losses and/or provide ‘window dressing’ for their annual reports,” he added. September, October and December are the most common months for mutual funds to partake in this activity, the strategist said. Senyek’s team came up with a basket of tax-loss selling stocks – names that have already suffered steep declines in 2024 and could see even more pressure in the next few months. Drop the losers Discount retailer Dollar Tree made it to Wolfe’s list of tax-loss selling contenders. The stock is down nearly 53% in 2024. On Wednesday, Dollar Tree plummeted 22% after cutting its full-year outlook , citing softer sales as a contributing factor. Analysts are also tepid on the stock, with 14 out of the 28 analysts covering it rating it a hold, according to LSEG. The recent quarterly results spurred a wave of downgrades from Wall Street, including BMO Capital Markets. “We are downgrading DLTR shares to Market Perform and cutting our [price target] to $68 as we no longer have conviction in the company’s outlook to justify an Outperform,” wrote BMO analyst Kelly Bania in a Thursday report. Her new price target assumes about 7% upside from Wednesday’s close. ZoomInfo Technologies , which provides data for companies, was also on Wolfe’s list. Shares are off 46% in 2024. More than half of the analysts covering ZoomInfo deem it a “hold,” according to LSEG – including Mizuho Securities’ team. “While we believe there’s a longer term opportunity for ZI to reaccelerate revenue growth as it shifts its business mix towards enterprise customers and benefits from Copilot/[desktop as a service] monetization, we expect the company’s near-term challenges around downsells/renewals to continue to weigh on the shares,” Mizuho analysts wrote in an Aug. 13 report. Other names in Wolfe’s tax-loss selling basket include electric vehicle manufacturer Rivian Automotive , pharmacy chain Walgreens Boots Alliance and diabetes management company Dexcom . Tax-loss selling for everyone You don’t have to be a portfolio manager to benefit from dumping a few of your biggest losers as the year winds down. Individual investors with a taxable brokerage account can make the same move: Sell your losers and use the realized losses to offset your capital gains. If your losses exceed your capital gains, you may apply up to $3,000 of those losses toward your ordinary income and carry over the rest to future years. Avoid violating the wash sale rule: That is, selling an asset at a loss and then buying a “substantially identical” security within 30 days before or after the transaction. The IRS can disallow your loss in this case.
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