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In Part 1 we explained that it is 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 taxes 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 improving 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 20%, 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. With the majority of stocks having risen this year perhaps this year's bounce will be amplified. Here are the next five companies on our list:

Fusion-io, Inc. (NYSE:FIO)

Fusion-io develops, markets and sells storage platforms worldwide. The market cap is $901 million and the stock trades an average of 3.3 million shares per day. Earnings are estimated to improve from an estimated deficit of $0.29 this fiscal year to a deficit of $0.13 next fiscal year. Revenues are slated to increase from this year's estimate of $382 million to $458 million next fiscal year. Fusion-io is a perennial takeover candidate. The stock is down 63% this year.

With shares essentially flat and selling off into the new year Fusion-io started off 2013 poorly. Share have continued their downward trend and are trading near their 52-week lows.

(click to enlarge)

Source: Yahoo Finance

ION Geophysical Corporation (NYSE:IO)

ION Geophysical provides planning and seismic processing services, software and acquisition services to the energy industry worldwide. The company has a market cap of $516 million and the stock trades an average of 1.8 million shares per day. Earnings are slated to increase from $0.01 this year to an estimated $0.29 next year. Revenues are estimated to increase from $457 million this year to $543 million next year. The stock is down 51% this year.

With Ion Geophysical's recent troubles and continued downward trajectory, it makes this an excellent tax loss candidate for a probably bounce in 2014.

(click to enlarge)

Source: Yahoo Finance

Mellanox Technologies, Ltd. (NASDAQ:MLNX)

Mellanox is a fables semiconductor company that develops and supplies interconnect products for computing, storage and communications applications in the high performance computing market. The market cap here is $1.66 billion and the stock trades an average of 816,000 shares per day. Earnings this year are estimated at $0.89 per year and are estimated to increase to $1.64 per share next year. Likewise revenues are slated to increase from $393 million this year to $501 million next year. The stock is down 37% this year.

Once a high-flyer, Mellanox shares have come back down to earth in 2013 from its all-time highs reached in 2012. If the company can deliver on its growth expectations the shares could rebound strongly in 2014.

(click to enlarge)

Source: Yahoo Finance

Netgear Inc. (NASDAQ:NTGR)

Netgear provides networking products to consumers, businesses and service providers. The market cap is $1.22 billion The company trades an average of 390,000 shares per day. Earnings are estimated to be $2.25 per share this year and are estimated to increase to $2.43 per share next year. Revenues are estimated to increase from $1.36 billion this year to $1.48 billion next year. The stock is off 22% this year.

If one is a believer in the networking segment within the tech sector, then Netgear is worth a look heading into 2014. It has been a loser in 2013 and should sport healthy growth in 2014 that could move shares higher.

(click to enlarge)

Source: Yahoo Finance

Odyssey Marine Exploration Inc. (NASDAQ:OMEX)

Odyssey Marine engages in the archaeologically sensitive exploration and recovery of deep ocean shipwrecks worldwide. Odyssey has a market cap of $151 million. The stock trades an average of 1.3 million shares per day. Earnings this year are estimated at a deficit of $0.19 per share and are estimated to improve to a deficit of $0.02 next year. Revenues are estimated to increase from $26 million this year to $33 million next year. The stock is down 38% this year.

Odyssey shares have been hurt by negative reports and short sellers of late, and as the company is trading at two year lows it stands to reason that come January shares could bounce - especially if management addressed the issues shorts are bringing up (all of which is circumstantial at best).

(click to enlarge)

Source: Yahoo Finance

In conclusion, all of the companies featured on our list have had a horrendous year in the stock market with each down in excess of 20% in spite of a rising market. Each company is a prime candidate for tax loss selling and likewise should experience a bounce in their stock prices as tax selling abates as the year comes to an end. Additionally, each of our featured companies has improving fundamental outlooks with earnings per share for each company estimated to increase next year. We feel the stage is set for a potentially rewarding 30 to 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. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Tax Loss Candidates To Buy - Part 2