It's that time of year again - no we don't mean the Holiday Season - we are referring to tax-loss selling season. Every year around this time investors are afforded the opportunity to sell their losing positions thereby "harvesting" their tax losses to offset and/or eliminate the capital gains that they may have realized on their other positions. Tax-loss selling is often concentrated in those stocks that have suffered the greatest declines during the year. We therefore like to review the list of stocks with the greatest year-to-date declines and attempt to identify from that list a few names that look "oversold," have decent fundamentals and which might be subject to a technical bounce as tax-loss selling dries up as the end of the year approaches and disappears entirely with the advent of the new year. To that end we have identified 15 stocks that have suffered year-to-date declines of at least 40%, have a small enough market cap that the tax loss selling could have artificially depressed share prices and are predicted to have earnings per share and/or revenue increases in the next fiscal year compared with the current year. Here are the first five companies on our list:
Arkansas Best Corporation (ABFS)
Arkansas Best predominantly engages in motor carrier freight transportation in the United States. The company is based in Fort Smith, Arkansas, and has a market cap of $230 million. Average daily volume is 380,000 shares per day. Earnings are scheduled to rise to $0.63 per share next fiscal year from a loss of $0.29 per share this fiscal year. Likewise, revenue is slated to increase to $2.25 billion from $2.05 billion this year. Book value is $18.37 per share. Per Barchart.com the 50-day moving average for the stock is $8.09. Also, as per Nasdaq the short ratio as of the end of November is 5.45 days to cover.
Accretive Health, Inc. (AH)
Accretive Health is a $1.1 billion market cap company that trades 587,000 shares per day and provides revenue cycle management services for hospitals and healthcare providers. The company is based in Chicago, Illinois. Earnings are scheduled to increase to $0.48 per share next fiscal year from an estimate of $0.25 per share this year. Revenue is expected to increase to $1.06 billion next fiscal year from $951 million this year. The company is debt free. The 50-day moving average was$11.61 per Barchart.com. The Nasdaq November 30 data had the short interest ratio all the way up to 17.23, which is another factor that might help this stock bounce.
Body Central Corp. (BODY)
Body Central is a $158 million market cap company that trades an average of 235,000 shares per day. Body Central operates as a specialty retailer of young women's apparel. Earnings are estimated to increase from this year's estimate of $0.83 per share to $0.98 per share next year. Revenue should increase from an estimated $312 million this year to $349 million next year. The company is debt free. Per Barchart.com the 50-day moving average is $10.16. The November 30 Nasdaq data has the short interest at a high 9.10 days to cover.
CEVA, Inc. (CEVA)
CEVA is a $341 million market cap company that trades an average of 233,000 shares per day. CEVA engages in licensing silicon intellectual property. Earnings are estimated at $0.78 per share this year and $0.88 per share next fiscal year with revenue estimated to increase from $54 million this year to $57 million next year. The company has no debt. Barchart.com has the 50-day moving average at $14.78.At the end of November Nasdaq listed the short interest at 5.70 days to cover.
Federal- Mogul Corp. (FDML)
Federal Mogul is a $738 million market cap company that trades an average of 168,000 shares per day. The company supplies powertrains and safety technologies worldwide. Earnings are estimated to increase from $0.83 per share this year to $1.00 per share next fiscal year. Revenue is estimated to increase from $6.65 billion to $6.96 billion next year. Book value is $9.44 per share. The 50-day moving average is $7.96 according to Barchart.com and Nasdaq has the current short interest at a high 9.49 days to cover.
In conclusion, all of the companies featured above have had a horrendous year in the stock market with each down in excess of 40% year to date. Each company is a prime candidate for tax-loss selling and since all of the companies have a relatively small market capitalization we feel that their stock prices likely have been artificially depressed by shareholders selling for tax reasons. Surprisingly, each of our featured companies has good fundamental outlooks with all projected to have top line growth in the next fiscal year. Additionally, technicals are starting to turn favorable as each of the companies has either broken through its 50-day moving average or is on the verge of doing so. We feel all of this sets the stage for a potentially rewarding 30-45 day trade in each of these companies.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.