MW This once-a-year tax-saving move has put these 7 stocks on sale
By Michael Brush
Fund managers do tax-loss selling now to offset gains - giving value investors an opportunity
The "November effect" refers to the idea that stocks that were suppressed by tax-loss selling in October are supposed to rebound in November as that selling pressure eases. This often happens because fund managers have to finish booking losses against gains by the end of October.
Yet the November effect has badly disappointed so far this year. Earlier this month, the seasonal effect was neutered by stock-market weakness. Both the S&P 500 SPX and Nasdaq COMP were off by several percentage points in early November.
But this only means that the November effect has been delayed, because the bull market isn't over yet.
There are two ways to look at the November effect. It can help you get into stocks that may outperform in the short term as selling pressure eases - or you can use the related weakness as an opportunity to pick up medium-term positions at better prices.
Since shopping for November-effect stocks is essentially a contrarian form of value investing, I recently checked in with three value-oriented, contrarian-minded fund managers to ask for their best November-effect candidates. The stocks had to be down this year through October, with good reasons to believe the negativity is unwarranted.
Not surprisingly, many of these stocks are in sectors such as consumer staples, real estate, apparel and energy - all poor performers this year.
1. Lululemon Athletica
By the end of October, the shares of these two popular apparel retailers were trading at their lows for the year, each down around 50%. That made them strong candidates for tax-loss selling.
The companies struggle with two big problems. Apparel spending has been soft this year. And they each face some tough competition - Lululemon $(LULU)$ from Alo Yoga and Vuori, and Deckers (DECK) from Nike $(NKE)$.
"For both, the issue is slowing sequential sales due to weakness in the retail category and competition," says Justin Menne, a portfolio manager on Harbor Capital's multi-asset solutions team.
Yet Lululemon and Deckers are high-quality businesses with attractive profit margins and low leverage, and they are posting healthy sales growth. "They face challenges, but they are more than priced in to the stocks. The risk-reward is skewed favorably," Menne says.
Shares of this package-delivery company put in a decent performance in October. But UPS's stock (UPS) probably would have done better if not for the tax-loss selling. Going into October, the stock was down 33% for the year.
UPS's package-delivery service enjoys long-term tailwinds from e-commerce growth. The shares should do well as cost cutting boosts margins next year, says Randy Hare, director of equity research at Huntington Bank. UPS is deploying AI-powered robots, closing several sites and eliminating jobs. Hare says he expects earnings growth to start in the June quarter and, as 2026 progresses, year-over-year sales and earnings comparisons to improve.
4. Hormel Foods
Since the late 1800s, Hormel Foods $(HRL)$ has sold protein-based food, now under familiar brands including Spam, Jennie-O and Dinty Moore. Hormel has recently expanded into nonmeat protein brands including Skippy and Planters via acquisitions.
This product line exposes Hormel to input-cost inflation. Although second-quarter sales growth was OK at 6%, higher commodity costs weighed on profit margins and earnings. This helps explain why, going into October, the stock was down 22% for the year, making it a solid candidate for tax-loss selling.
Hormel has been increasing prices and cutting costs to offset these risks. John Buckingham at the Prudent Speculator thinks this means earnings could return to growth mode next year and in 2027, and that will improve sentiment on the stock.
The stock recently traded at trailing price-to-earnings ratio of 16, a 35% discount to its trailing five-year average of 24.6, according to LSEG. That's too cheap, says Buckingham, who suggests the stock in his investment newsletter. "We get paid to wait for the market to come to its senses," he says. "The P/E won't get back to 24 but we don't need it to." Meanwhile, he notes that Hormel's solid cash flow and strong balance sheet support its recent 5%-plus dividend yield. Hormel has increased dividends consecutively for decades.
Going into October, shares of this energy company were down 22%. That made the stock a strong candidate for tax-loss selling. Matador shares (MTDR) declined after the company's third-quarter earnings report on Oct. 21. Investors got upset when they learned Matador was spending more than expected to develop wells.
Yet that spending will help the company beat estimates over the next several quarters, William Blair analyst Neal Dingmann maintains. He has an outperform rating on the stock. Matador has a solid balance sheet, which it is using to boost its dividend - by 20% last quarter - and buy back stock.
At current prices, the stock trades at around a 50% discount to its trailing five-year price-to-sales ratio. Insiders at Matador have purchased $730,000 worth of stock since mid-August, in the $39 to $48 range.
6. Adobe
7. Salesforce
These two companies are in vastly different businesses but face the same threat: Investors worry they will lose customers to artificial intelligence.
AI is good at creating video and images, which has investors wondering if customers will have less interest in Adobe's $(ADBE)$ Photoshop and media-editing tools, Menne says. Likewise, he thinks investors are nervous that Salesforce (CRM) clients can turn to AI to develop customer-service tools. "There is a huge sentiment overhang based on the question of what does the future look like in terms of AI," he says.
These fears help explain why Adobe and Salesforce shares were both down more than 20% heading into October, making them attractive candidates for tax-loss selling.
Menne says the fears are overblown. He notes that Adobe and Salesforce both have longstanding customer relationships. In fact, these two companies may actually get a boost from AI, since they're incorporating the technology into their platforms and product lines.
Market worries discounted
What about the broader market? If the early November weakness deepens, it won't make sense to buy tax-loss selling victims now. Yet a recession - the most common cause of corrections and bear markets - isn't in the forecast. Ed Yardeni of Yardeni Research noted in a client call on Nov. 10 that improvement in earnings growth and profit margins in the second and third quarters was too strong to foreshadow a recession.
Menne agrees. "We are still overweight risk," he says. "Corporate fundamentals are still healthy, so we don't have immediate cause for concern."
Michael Brush is a columnist for MarketWatch. At the time of publication, he owned UPS and MTDR. Brush has suggested LULU, UPS, MTDR and CRM in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks
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-Michael Brush
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November 15, 2025 12:34 ET (17:34 GMT)
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