Bank of America: Buy these 56 losing stocks that are on the verge of becoming winners, thanks to a little-known investing strategy that has consistently outperformed the market since 1986
- The end of the year is approaching, and investors are looking to lock in gains and offset losses.
- But buying some of the worst-performing stocks at the end of 2023 might mean profits in 2024.
- Bank of America identified 56 stocks that are down this year but could pop next year.
As the year comes to a close, investors around the world turn their attention to their portfolios to assess their gains and losses.
This annual review is simple in a successful year: you reap the profits from wins, shrug off losses, and pat yourself on the back for outwitting the market.
However, when losses outnumber gains, the final few weeks of the year can inspire feelings of dread, panic, and desperation, with many investors attempting to squeeze out profits before the calendar changes.
Rather than blindly buying to shore up their portfolios, investors would be better served by employing a little-known strategy that has consistently rewarded those in the know: purchasing tax-loss harvesting candidates with strong underlying fundamentals.
The concept of tax-loss harvesting is straightforward: investors reduce capital gains taxes by selling securities for a capital loss. This strategy of selling losers to offset the profits – and taxes – of winners is popular among institutional investors, but it has also gained popularity among retail investors.
Bank of America analysts, led by Savita Subramanian, head of US equity & quantitative strategy, support a new twist on the strategy. Subramanian identified TLCs, or tax-loss candidates, in a recent note to clients. These stocks were down year to date through the end of October, and Subramanian believes their losses have only widened due to tax-loss harvesting by institutional investors who must sell by October 31.
However, one investor’s garbage is another’s gold. Subramanian sifted through these losers to find the stocks that don’t deserve to be down so much this year, with the goal of buying these higher-quality stocks after they’ve fallen in order to profit from their subsequent rally after the sell-off ends.
While buying stocks that the big money is selling out of may not be appealing, history shows that it is profitable.
“We’ve historically seen evidence of tax-loss selling by institutional investors in Oct. (peak outflows), and by retail investors in Dec. ahead of the Dec. 31 cut-off for individual investors,” Subramanian wrote in an email. “Since 1986, stocks down 10% or more from Jan. 1-Oct. 31 (Tax Loss Candidates, or TLCs) beat the S&P by 1.9ppt on avg. over the next 3mos. with a 70% hit rate.”
The use of this strategy requires precise timing. Institutional investors must sell their losing stocks by October 31 in order to benefit from tax-loss harvesting, while retail investors have until December 31. Tax-loss candidates will likely fall in price in the weeks leading up to those two dates as investors sell, but this will only make these fundamentally sound stocks cheaper in the months following.
Subramanian and her team identified 56 stocks that were down at least 10% through the end of October but were buy-rated by Bank of America analysts in order to find investments that have been oversold and could potentially pop after the end of the year.
These stocks are listed below, along with the ticker, last closing price, sector, and year-to-date return for each.
1. Insulet Corporation
Ticker: PODD
Last Closing Price: $140.44
Sector: Health Care
YTD Return: (45.59%)
Source: Bank of America
2. KeyCorp.
Ticker: KEY
Last Closing Price: $10.99
Sector: Financials
YTD Return: (34.29%)
Source: Bank of America
3. Sealed Air Corporation
Ticker: SEE
Last Closing Price: $33.06
Sector: Materials
YTD Return: (31.22%)
Source: Bank of America
4. Alexandria Real Estate Equities, Inc.
Ticker: ARE
Last Closing Price: $97.85
Sector: Real Estate
YTD Return: (28.86%)
Source: Bank of America
5. Paramount Global
Ticker: PARA
Last Closing Price: $11.92
Sector: Communication Services
YTD Return: (20.81%)
Source: Bank of America
6. Bath & Body Works
Bath & Body Works, Inc.
Ticker: BBWI
Last Closing Price: $30.68
Sector: Consumer Discretionary
YTD Return: (21.96%)
Source: Bank of America
7. ResMed
Ticker: RMD
Last Closing Price: $150.11
Sector: Health Care
YTD Return: (26.80%)
Source: Bank of America
8. Agilent Technologies
Ticker: A
Last Closing Price: $104.49
Sector: Health Care
YTD Return: (28.10%)
Source: Bank of America
9. Extra Space Storage
Ticker: EXR
Last Closing Price: $105.39
Sector: Real Estate
YTD Return: (27.03%)
Source: Bank of America
10. Fifth Third Bancorp
Ticker: FITB
Last Closing Price: $25.05
Sector: Financials
YTD Return: (20.02%)
Source: Bank of America
11. Northern Trust Corporation
Ticker: NTRS
Last Closing Price: $70.10
Sector: Financials
YTD Return: (19.94%)
Source: Bank of America
12. US Bancorp
Ticker: USB
Last Closing Price: $34.33
Sector: Financials
YTD Return: (18.62%)
Source: Bank of America
13. Fidelity National Information Services
Ticker: FIS
Last Closing Price: $51.37
Sector: Financials
YTD Return: (23.31%)
Source: Bank of America
14. PayPal Holdings
Ticker: PYPL
Last Closing Price: $55.06
Sector: Financials
YTD Return: (20.98%)
Source: Bank of America
15. Tapestry, Inc.
Ticker: TPR
Last Closing Price: $27.32
Sector: Consumer Discretionary
YTD Return: (25.68%)
Source: Bank of America
16. CVS Health Corporation
Ticker: CVS
Last Closing Price: $69.66
Sector: Health Care
YTD Return: (24.30%)
Source: Bank of America
17. Alaska Air Group
Ticker: ALK
Last Closing Price: $32.14
Sector: Industrials
YTD Return: (21.67%)
Source: Bank of America
18. Genuine Parts Company
Ticker: GPC
Last Closing Price: $130.67
Sector: Consumer Discretionary
YTD Return: (23.40%)
Source: Bank of America
19. Target
Ticker: TGT
Last Closing Price: $111.07
Sector: Consumer Staples
YTD Return: (23.31%)
Source: Bank of America
20. DexCom
Ticker: DXCM
Last Closing Price: $93.67
Sector: Health Care
YTD Return: (12.90%)
Source: Bank of America
21. Mosaic Company
Ticker: MOS
Last Closing Price: $33.68
Sector: Materials
YTD Return: (23.49%)
Source: Bank of America
22. American Tower Corporation
Ticker: AMT
Last Closing Price: $184.06
Sector: Real Estate
YTD Return: (11%)
Source: Bank of America
23. M&T Bank Corporation
Ticker: MTB
Last Closing Price: $118.51
Sector: Financials
YTD Return: (15.40%)
Source: Bank of America
24. Boston Properties
Ticker: BXP
Last Closing Price: $55.82
Sector: Real Estate
YTD Return: (12.21%)
Source: Bank of America
25. Kimco Realty Corporation
Ticker: KIM
Last Closing Price: $18.52
Sector: Real Estate
YTD Return: (10.20%)
Source: Bank of America
26. McCormick & Company
Ticker: MKC
Last Closing Price: $64.81
Sector: Consumer Staples
YTD Return: (22.3%)
Source: Bank of America
27. Newmont Corporation
Ticker: NEM
Last Closing Price: $37.98
Sector: Materials
YTD Return: (18.20%)
Source: Bank of America
28. Thermo Fisher Scientific
Ticker: TMO
Last Closing Price: $447.51
Sector: Health Care
YTD Return: (17.90%)
Source: Bank of America
29. Bistol-Meyers Squibb
Ticker: BMY
Last Closing Price: $51.13
Sector: Health Care
YTD Return: (26.50%)
Source: Bank of America
30. Kraft Heinz Company
Ticker: KHC
Last Closing Price: $33.51
Sector: Consumer Staples
YTD Return: (17.80%)
Source: Bank of America
31. Charles River Laboratories Internationl
Ticker: CRL
Last Closing Price: $174.40
Sector: Health Care
YTD Return: (18.30%)
Source: Bank of America
32. Paycom Software, Inc.
Ticker: PAYC
Last Closing Price: $162.65
Sector: Industrials
YTD Return: (48.74%)
Source: Bank of America
33. MetLife
Ticker: MET
Last Closing Price: $60.00
Sector: Financials
YTD Return: (14.4%)
Source: Bank of America
34. Keurig Dr. Pepper
Ticker: KDP
Last Closing Price: $30.86
Sector: Consumer Staples
YTD Return: (12.20%)
Source: Bank of America
35. AT&T
Ticker: T
Last Closing Price: $15.74
Sector: Communication Services
YTD Return: (13.80%)
Source: Bank of America
36. Honeywell International
Ticker: HON
Last Closing Price: $186.43
Sector: Industrials
YTD Return: (12%)
Source: Bank of America
37. Interpublic Group of Companies
Ticker: IPG
Last Closing Price: $29.09
Sector: Communication Services
YTD Return: (10.9%)
Source: Bank of America
38. DTE Energy Company
Ticker: DTE
Last Closing Price: $98.77
Sector: Utilities
YTD Return: (16.7%)
Source: Bank of America
39. PPL Corporation
Ticker: PPL
Last Closing Price: $25.08
Sector: Utilities
YTD Return: (13.9%)
Source: Bank of America
40. Corning
Ticker: GLW
Last Closing Price: $27.39
Sector: Information Technology
YTD Return: (12.10%)
Source: Bank of America
41. Hershey Company
Ticker: HSY
Last Closing Price: $189.55
Sector: Consumer Staples
YTD Return: (18.80%)
Source: Bank of America
42. Morgan Stanley
Ticker: MS
Last Closing Price: $73.47
Sector: Financials
YTD Return: (10.30%)
Source: Bank of America
43. Match Group
Ticker: MTCH
Last Closing Price: $29.18
Sector: Communication Services
YTD Return: (26.38%)
Source: Bank of America
44. Xcel Energy Inc.
Ticker: XEL
Last Closing Price: $61.07
Sector: Utilities
YTD Return: (12.90%)
Source: Bank of America
45. Abbot Laboratories
Ticker: ABT
Last Closing Price: $95.97
Sector: Health Care
YTD Return: (12.7%)
Source: Bank of America
46. Duke Energy Corporation
Ticker: DUK
Last Closing Price: $89.89
Sector: Utilities
YTD Return: (11.90%)
Source: Bank of America
47. CMS Energy Corporation
Ticker: CMS
Last Closing Price: $55.50
Sector: Utilities
YTD Return: (12.30%)
Source: Bank of America
48. Sysco Corporation
Ticker: SYY
Last Closing Price: $65.66
Sector: Consumer Staples
YTD Return: (12.9%)
Source: Bank of America
49. General Motors
Ticker: GM
Last Closing Price: $28.81
Sector: Consumer Discretionary
YTD Return: (11.55%)
Source: Bank of America
50. Ameren Corporation
Ticker: AEE
Last Closing Price: $78.12
Sector: Utilities
YTD Return: (12.2%)
Source: Bank of America
51. Elevance Health
Ticker: ELV
Last Closing Price: $451.64
Sector: Health Care
YTD Return: (11.9%)
Source: Bank of America
52. UDR, Inc.
Ticker: UDR
Last Closing Price: $32.26
Sector: Real Estate
YTD Return: (13.5%)
Source: Bank of America
53. APA Corporation
Ticker: APA
Last Closing Price: $39.69
Sector: Energy
YTD Return: (12.8%)
Source: Bank of America
54. Coca-Cola
Ticker: KO
Last Closing Price: $57.09
Sector: Consumer Staples
YTD Return: (10.6%)
Source: Bank of America
55. Northrop Grumman Corp.
Ticker: NOC
Last Closing Price: $475.72
Sector: Industrials
YTD Return: (12.6%)
Source: Bank of America
56. Hasbro
Ticker: HAS
Last Closing Price: $46.51
Sector: Consumer Discretionary
YTD Return: (22.73%)
Source: Bank of America
