MW How to make money from tax-loss selling between now and the end of the year

By Mark Hulbert

The biggest year-to-date losers will likely fall even more in coming weeks - and become good bounce-back candidates

One of the more consistently profitable trades of the entire calendar is available in coming weeks.

It involves buying stocks that have been artificially depressed because of tax-loss selling, and selling them when they (hopefully) rebound in January. Though there is no guarantee that they will rebound, they far more often than not do - since after the turn of the new year, that artificial selling pressure will be removed. Jeffrey Hirsch of the Stock Trader's Almanac refers to this approach as "Wall Street's Only 'Free Lunch.'"

You might wonder if it's premature to focus on tax-loss selling strategies, since tax-loss selling volume picks up in late November and December. The reason to nevertheless focus on these strategies in early October is that mutual funds are required to use Oct. 31 as the end of their tax year. They can reduce the capital gains they will otherwise distribute to shareholders if they offset those gains with tax losses - provided they sell their losers before Halloween.

One simple strategy to exploit tax-loss selling is to place buy limit orders well below the current prices of those stocks with the worst year-to-date returns. Since these losers are likely in coming weeks to be among those heavily sold for tax-loss purposes, they are prone to dropping even further and triggering some of your buy limits. Odds are good that, as a group, the stocks that satisfy your buy limits will be higher in January.

To illustrate, consider the 20 stocks mentioned a year ago in a column on this strategy. They were among those in the S&P 1500 index XX:SP1500 with the worst year-to-date returns. Even though these stocks on average had already fallen 35.1% since the beginning of 2024, they fell a further 16.2% between the date of my early-October column and the end of the year. At their subsequent highs in January 2025, each of these stocks was higher than at its late-2024 low, and on average they were 20.1% higher.

To be sure, it's unrealistic to expect that anyone could have captured the full extent of that 20.1% average. You would have had to be a clairvoyant to know when, in late 2024, each of the stocks was trading at what would turn out to be its low and then, in January, to know when it was trading at its high price for the month. But handsome gains were still very much within reach.

With this background in mind, I am repeating the approach discussed in my year-ago column. The 20 stocks below are those within the S&P 1500 with the worst year-to-date returns. Don't forget to place buy orders well below their current prices. And remember also that exploiting tax-loss selling is a short-term trade better suited to your speculative-play money than your long-term investments.

   Company                         Ticker   2025 total return through Oct. 1 
   Sarepta Therapeutics Inc.      SRPT                                -84.1% 
   Vestis                         VSTS                                -67.6% 
   Tandem Diabetes Care Inc.      TNDM                                -65.5% 
   Grid Dynamics Holdings Inc.    GDYN                                -64.8% 
   Freshpet Inc.                  FRPT                                -63.5% 
   Inspire Medical Systems Inc.   INSP                                -61.0% 
   The Trade Desk Inc.            TTD                                 -58.0% 
   Helen of Troy Ltd.             HELE                                -56.6% 
   Lululemon Athletica Inc.       LULU                                -53.6% 
   Six Flags Entertainment Corp.  FUN                                 -52.9% 
   Neogen Corp.                   NEOG                                -52.2% 
   BellRing Brands Inc.           BRBR                                -51.9% 
   Cable One Inc.                 CABO                                -50.6% 
   Deckers Outdoor Corp.          DECK                                -50.2% 
   Robert Half Inc.               RHI                                 -49.9% 
   Sabre Corp.                    SABR                                -49.0% 
   RH                             RH                                  -49.0% 
   Fortrea Holdings Inc.          FTRE                                -49.0% 
   Xencor Inc.                    XNCR                                -48.5% 
   Gartner Inc.                   IT                                  -48.2% 
                                                                Source: LSEG 

Click on the tickers for more information about each company.

Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com.

-Mark Hulbert

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

October 02, 2025 14:39 ET (18:39 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.