As with every December, tax-selling season is upon us. With such significant market gains achieved in 2024, investors may devote extra effort this year to finding losers that can be sold to offset taxable gains. That could result in some great contrarian stock opportunities for investors. This article presents a number of those stocks from a variety of sectors.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
Tax-Loss Selling Deadlines
The trading deadline for transactions to be recognized for the current tax year differs based on residency. For U.S. investors, the deadline is the final trading day of the year, which is set to be Tuesday, December 31, 2024.
In Canada, the tax year is determined by the settlement date of trades. The settlement was previously T+2 (and T+3 prior to that), but this changed in 2024. Now that stock transactions settle the business day following the trade (T+1), the deadline for tax-loss selling in Canada this year is Monday, December 30, 2024.
Four Contrarian Candidates of Interest
Without further ado, here are four companies whose stocks are in the red this year and have faced increased selling pressure in recent weeks.
Tripadvisor (Travel)
Tripadvisor (TRIP) is one of the top holdings in my portfolio. Shares of the travel services firm rocketed higher in early 2024 on expectations of a sale to private equity. However, Tripadvisor management backed out of M&A talks, and my personal suspicion is that it was related to a disagreement over the fair valuation of the Viator segment.
Tripadvisor has long been driven by its legacy Tripadvisor.com website, which draws revenues from advertising and links to OTAs (Online Travel Agents). However, the namesake business has been regularly shrinking, while the Viator.com business has been slowly emerging to the point where its revenues finally overtook those of brand-name Tripadvisor in the recent Q3.
Viator is a leader in local day-trip tours, and instead of organizing the tours, the website serves as a trusted platform for the sale of travel experiences from local tour agencies. I not only believe that day tours are the future and that all-inclusive 7-day or 10-day arrangements will lose favor with new generations of travelers, but that Viator has leadership and a position of power over local tour operators, especially in emerging market countries.
Once a larger number of investors realize that TRIP stock is not defined by its brand name business, but by Viator’s growth, I expect the stock to advance significantly. Shares currently trade near their 52-week lows in the mid-$13 range, representing a forward P/E of under 11x. Analysts have a consensus Hold rating, with an average price target of $17.30.
Vera Bradley (Luxury Retail)
Vera Bradley (VRA), famous for its bright and flowery bags and accessories, has been down on its luck not just in 2024, but for nearly a decade. I chalk this up to two factors: graduating clientele and mismanagement. Not dissimilar to struggles experienced by The Gap (GPS), which I recently covered here at TipRanks, Vera Bradley struck a hot retail trend with a distinctive product line, decades ago. The inevitable question was when and how to abandon the legacy clientele as they aged and subsequently modernize the business. It’s a difficult challenge to handle for sure, but Vera Bradley has done it poorly.
A disastrous acquisition of Pura Vida (whose value was almost entirely written off as impaired) in the pursuit of growth was the worst move and incredibly value-destructive. Thankfully, the company has maintained gross margins above 50%, which to me means that despite declining sales (down ~25% in the past decade), the Vera Bradley brand itself isn’t impaired. Remaining customers continue to be happy to pay for the company’s unique style.
Despite recently becoming OCF (Operating Cash Flow)-negative against a history of cash inflows, new management (the former CEO retired in 2022) has started repurchasing shares. With only ~$14 million remaining in the bank (a historic low), the buyback activity suggests management is confident that the company’s financial position will not deteriorate further. If the business does continue to struggle, I’d expect outside retail experts to step in and purchase the brand. Vera Bradley’s Enterprise Value is an undemanding $100 million. The stock trades for about 0.25x revenues. Shares have declined 55% so far this year.
Telus International (Outsources Services)
Telus International (TIXT) might be the most notable candidate here that has suffered near-term selling pressure, potentially due to tax selling. TIXT is a services company spun off from Telus Corp (TU), one of Canada’s Big 3 telecom providers. The spin-off occurred in the $30/share range back in 2021, and shares currently trade for nearly one-tenth of that level.
While I acknowledge that Telus International’s business isn’t truly unique, the cashflows look salivating. Free cash flow (FCF) is running near $100 million per quarter, against a market cap of about $1 billion and an enterprise value of about $2.3 billion. Reported net income is significantly dragged down by depreciation and amortization expense, which is nowhere near the maintenance capex expended by the company.
Investors focused on cashflows are likely to come to a much different conclusion than those who look at reported earnings (which recently fell negative). As a carrot, Canada’s Telus Corp. (TU), which remains a majority owner of Telus International, could re-emerge and acquire the business they spun off at a significant discount. The stock trades for less than 7x EV/EBITDA.
TIXT shares have limited Wall Street coverage, with one Buy Rating and three Hold Ratings. The average TIXT stock price target is $5.38, which represents nearly 51% potential upside from current levels.
Ballard Power (Clean Energy)
I’ve previously covered Ballard Power (BLDP) (TSE:BLDP) here at TipRanks. The hydrogen fuel-cell company has been working the wine for several decades and reached its pinnacle of investor interest during the dot-com bubble.
I have high hopes for fuel cell technology, whose efficiency I believe is likely to exceed that of electric vehicles. Ballard has a formidable amount of experience in the field that seems sure to pay off if the technology takes off. While the company’s recent decision to preserve cash against the backdrop of slow fuel-cell adoption speaks poorly for the immediate term, it actually holds cash about 30% higher than its market cap. That cash could last well into the next decade, which means that Ballard has a tremendous runway left.
The company has announced several new contracts this year to bus and rail manufacturers, so it remains possible that management is low-balling near-term/mid-term expectations.
Shares of BLDP are no longer near their $1.23 annual lows, but this remains a battered stock, and the price has fallen off some 10% from near-term highs. I’d call Ballard Power a patient investor’s dream, and slices of positions can be cashed in on short-term run-ups, while a core position can be retained for the company’s long-term destiny.
From the ten Wall Street analysts that cover the company, there are no Buy ratings against five Hold ratings and five Sell ratings. The average BLDP price target of $1.41 represents about 6% downside from the recent trading price.
Concluding Remarks
While tax-loss selling of losing stocks represents reasonable financial management by investors who are concerned about tax bills, the practice can also provide a chance for opportunistic investors to buy in. The above four stocks are on my radar for potential rebounds in 2025.
