8 money-losing stocks that might make you a lot of money in January

8 money-losing stocks that might make you a lot of money in January

Stock markets will be disrupted by tax-loss selling between now and the end of the year, and savvy purchasers can profit from the commotion.


Year-end tax-loss selling is the source of this turbulence. When an investor sells a stock at a loss to balance capital gains achieved earlier in the year on which capital gains tax would otherwise be required, this is known as a capital loss. To avoid paying higher taxes in 2021, such sales must be done by December 31.

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Consider the performance of a hypothetical portfolio including the 10% of U.S. equities with the lowest trailing-12-month returns, rebalanced monthly, to get a sense of how important tax-loss selling is as the new year approaches. This portfolio’s equities should be the most vulnerable to tax-loss selling.


According to Dartmouth professor, Ken French’s research, this “losers” portfolio has become worse as the end of the year approaches since 1927, as shown in the figure below.

8 money-losing stocks that might make you a lot of money in January

This pattern’s investment implications are determined on your time horizon. If you’re not a short-term trader, the conclusion is that market volatility will be higher during the next two months. Avoid the temptation to sell a company due to speculative selling pressure that has nothing to do with its fundamentals.


Profiting from others’ tax-loss selling has a different investing significance for traders and short-term investors. As the chart indicates, the equities that have been hit the most by the selling tend to rebound quickly in January. That makes sense since tax-loss selling stops on December 31; in January, a significant burden is taken off these already-stricken stocks, and many of them perform well.


With that in mind, I compiled a list of companies that have appealing longer-term potential but are also losers for the year as of Oct. 22. Tax-loss selling is likely to decrease their returns dramatically between now and the end of the year, allowing traders to buy up a handful at bargain prices.

You can explore setting purchase limits substantially below the current market on a few of them in the hopes of filling a few of them. If history is any indication, these equities will likely rise considerably in January.

To make the table below, I started with a list of losers in the S& P 1500 index through the end of trade on Oct. 22. I further whittled down the list to only those that are now suggested by two or more of my auditing firm’s top-performing investing newsletters.

StockYTD %# Newsletters recommending
Bristol-Myers Squibb Company BMY, +0.36%-5.0%2
Cardinal Health, Inc. CAH, -1.69%-5.0%4
Walt Disney Company DIS, +1.53%-6.5%3
Amgen Inc. AMGN, -0.77%-7.0%2
FedEx Corporation FDX, +1.04%-9.6%4
PetMed Express, Inc. PETS, +3.44%-13.2%2
Activision Blizzard, Inc. ATVI, +2.42%-14.2%2
Viatris, Inc. VTRS, -1.00%-24.5%2
YTD return as of 10/22/21

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