Tax-loss harvesting is a strategic financial tactic investors employ to leverage market downturns for potential gains. The process involves selling securities at a loss to offset or minimize capital gains taxes on profitable investments. Essentially, it allows investors to capitalize on losses by selling underperforming assets. Then, they use those losses to offset taxable gains, thereby reducing their overall tax liability. This article will cover three stocks to take advantage of tax-loss selling.
In 2023, three stocks listed in the article will have experienced substantial declines. These downward trends make them prime candidates for tax-loss harvesting strategies. The negative year-to-date returns only scratch the surface. Behind these returns lie the fundamentals of strategic maneuvers, product expansions, and market pivots that shed light on why these stocks may hold promise beyond the temporary dips.
Understanding the underlying reasons for each stock’s decline becomes crucial in evaluating its potential for tax-loss harvesting. The dips in their price signify temporary market fluctuations rather than intrinsic issues within the companies themselves.
Alibaba (BABA)
Alibaba’s (NYSE:BABA) focus on expanding its merchant ecosystem and leveraging live streaming has shown remarkable progress. For instance, there was a notable increase of over 1 million new merchants joining the platform in Q2 fiscal 2024. The trend signifies Alibaba’s success in attracting and onboarding new sellers.
Additionally, the growth in live streaming participation rates, total live streaming time, and the increasing share of Gross Merchandise Value (GMV) from merchant-operated live streaming underscore the rising popularity and effectiveness of live streaming as a sales and engagement tool on Alibaba’s platforms. Close to 70% of CNY1 billion sales are generated from merchant-operated live streaming rooms. This proportion highlights the significance of this medium in driving sales. This relationship indicates the effectiveness of live streaming as a sales channel, mainly when operated by merchants. This makes it one of those tax-loss selling stocks to consider.
Fundamentally, the alignment between increased merchant influx, the rise in live streaming engagement metrics, and their respective contributions to overall GMV creates a clear numerical relationship. This showcases how Alibaba’s strategies to enhance merchant engagement and leverage live streaming as a sales tool leads to substantial sales and user interaction growth.
Moreover, Alibaba has adopted diversified sales models supported by concrete progress. These models include brand marketing-driven sales, everyday low-priced product sales, and live-streaming content-driven sales. For instance, there is explosive growth in everyday low-priced products, possibly through campaigns like the Taobao Good Price Festival and $10 billion in subsidy programs. The growth indicates increased consumer interest and purchases of competitively priced items.
Lastly, there is an increase in the number of VIP members to over $30 million in Q2 fiscal 2024. Therefore, the continued growth in GMV reflects the success of Alibaba’s strategies aimed at price advantages and consumer engagement for high-value customers.
Pfizer (PFE)
Looking at Pfizer (NYSE:PFE) products, especially Nurtec (for migraine) and Oxbryta (for sickle cell disease), suggests embedded growth potentials. For instance, in Q3 2023, there was a $233 million contribution by Nurtec. This product has a 17% market share in the US oral CGRP migraine market, signaling its traction within this niche but high-demand segment.
Similarly, with $85 million in global revenues, Oxbryta addresses the unmet needs of sickle cell disease (SCD). The representation of the burden of SCD globally, affecting approximately 12 million people, reflects a substantial market. Furthermore, 47% operational growth is recorded by the Vyndaqel family of products.
The uptake of the transthyretin amyloid cardiomyopathy indication primarily drives the company’s growth and demonstrates its potential in this therapeutic area. In this context, people between 120K and 150K suffer from Transthyretin Amyloid cardiomyopathy. Most cases are undiagnosed, indicating a significant unmet need Pfizer is addressing.
Fundamentally, Pfizer has successfully executed 13 out of 19 identified potential launches, including ongoing preparations for additional product launches, suggesting a solid pipeline. Critically, the operational growth of 10% year-over-year in revenue from Pfizer’s non-COVID products represents a positive performance trend. All in all, it’s one of those tax-loss selling stocks to keep on your watchlist.
The revenue and earnings guidance revision indicates Pfizer’s agility in adapting to market dynamics. The company mainly focuses on non-COVID products’ continued operational revenue growth from 6% to 8%. Finally, Pfizer aims to achieve at least $3.5 billion in net cost savings by the end of 2024, highlighting the company’s proactive approach to improving margins.
Paramount (PARA)
For Paramount (NASDAQ:PARA), the integration of Paramount+ and Showtime, launched in June, yielded positive outcomes as anticipated. This integration resulted in increased acquisition and engagement metrics, with premium-tier subscribers experiencing a 17% growth in hours of engagement in Q3 2023.
Moreover, Paramount+ implemented monthly pricing increases, leading to a 16% growth in average revenue per user (ARPU). The phased execution of price increases throughout the quarter suggests a revenue tailwind expected to materialize more fully in the subsequent quarters.
Additionally, Paramount’s collaborations with partners like Walmart (NYSE:WMT) and Delta Airlines (NYSE:DAL) have been instrumental in augmenting subscriber numbers and engagement. These partnerships have contributed to subscriber growth and acted as incremental drivers for consumer product franchises such as Teenage Mutant Ninja Turtles, PAW Patrol, and Yellowstone. Thus, its ability to leverage partnerships to extend content reach and drive additional revenue streams indicates Paramount’s adeptness in strategic collaborations, leveraging its content assets to diversify revenue streams.
Similarly, Paramount’s expansion strategies in various global markets highlight its flexibility in adapting to diverse market dynamics. By employing different models tailored to each market, Paramount aims to tap into international audiences efficiently. The company’s initiatives include owning and operating streaming platforms in major territories like the UK and Australia. Hence, Paramount is benefiting from cross-promotion with local broadcast networks. This makes it one of those tax-loss selling companies to consider.
Finally, the recent deals in Belgium and Greece, along with the expansion of Pluto TV in multiple countries, reflect Paramount’s global expansion trajectory. Therefore, its ability to establish a presence in diverse markets through tailored approaches suggests Paramount’s strategic vision and potential for continued international growth.
As of this writing, Yiannis Zourmpanos held long positions in BABA and PFE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.