1 Bullish Idea from 7 Tax-Loss Candidates in the Tech Sector
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Investors with a long-term time horizon need not manage investments just because the year is nearing a close. Mutual funds and traders might have a different approach. Quarterly fund-dressing and tax-loss selling could imply some unexpected moves in the next few days. For investors, tax-loss selling should be considered. As hard as it is for investors to take a loss – holding losing positions in hopes for a rebound could be fatal – companies that are significantly lower than the price paid should be looked at as candidates for tax-loss selling.
Keep in mind that other investors could also be selling for tax-loss reasons. This could exemplify the decline over the next few days.
Business Section: Investing Ideas
Using Kapitall’s Super Screener, companies that have lost nearly 35% or more in the 1-year period and have a market capitalization of over $1 billion are the ones investors might want to sell.
Investors who do not have a position in these companies could consider adding them to their watch list. The companies are potential winners if management or conditions change to improve the viability of their business model:
Ordered by market capitalization, the tech companies to watch are:
1) Rovi Corp. (NASDAQ: ROVI) – down 39% in the 1-year period.
2) Zynga (NASDAQ: ZNGA) – down 75% in the 1-year period.
3) Advanced Micro Devices (NYSE: AMD) – down 49% in the 1-year period.
4) Groupon (NASDAQ: GRPN) – down 78% in the 1-year period.
5) Best Buy (NYSE: BBY) – down 49% in the 1-year period.
6) Marvell Technology Group (NASDAQ: MRVL) – down 42% in the 1-year period.
7) Hewlett-Packard (NYSE: HPQ) – down 44% in the 1-year period.
Chart: 1-Year Performance:
Legendary investor Seth Klarman has positions in both Rovi Corp. and Hewlett-Packard. While his fund may now be managed by less-experienced fund managers, it reduced its position in HP in the most recent reported quarter. Zynga and Groupon have devastated investors this year. Zynga is in the midst of finding growth in mobile apps, as Facebook disassociates itself from it. Groupon is taking steps to supply local e-commerce solutions. It acquired CommerceInterface recently.
In the chip space, AMD and Marvell are being hurt by the weak PC sector. For years, AMD failed to compete effectively against Intel . The company has value: its graphics unit continues to offer products that compete effectively against rival NVIDIA Corp. In Q1 2013, AMD will release a Radeon HD 8000M-series. The company recently reduced wafer orders by a massive 75%. AMD is now spending $115 million in wafers, compared to $500 million as originally planned.
Investors hoping for a buyout of Best Buy will still need to wait. During the holiday period, investors could expect the company to generate strong sales, but the company lacks a catalyst for profit growth.
Of the companies mentioned, Best Buy could offer upside at the start of 2013. Any premium embedded in the share price of the company is now gone. In the short-term, the electronics retailer could surprise investors with better-than-expected revenue. Sales of smartphone devices should provide some support in its revenue, offset by weak LCD television sales.
Chip makers and companies exposed to the PC-sector are candidates for tax-loss selling. Marvell and AMD should not be expected to recover in the short-term. Weak DRAM pricing as reported by Micron confirm weak demand in the last quarter. This negativity should be expected to continue during the holiday quarter.
Preliminary data indicated holiday sales were weaker this year. From Oct. 28 through to Christmas Eve, retail sales rose 0.7% compared to the previous year. Online sales rose somewhere between 8.4% to 16% (according to ComScore). Best Buy will need strong online shopping activity to offset weaker sales at its physical stores.
chrispycrunch has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!