Tax day is right around the corner, and investors that are facing
a large tax bill might be thinking about what stocks to hang on
to and which ones to sell to pay those taxes.
Not all investors think of this issue the same way, but let's
take a look a few stocks that saw substantial gains over the
prior 52 weeks that have also had recent negative earnings
Bank On It
The first stock that could see potential selling pressure is in the financial sector. Those stocks had a good run in 2013 and might now be in the cross hairs of sellers due to recent HFT revelations.
UBS (UBS - Analyst Report) was up about 39% over the last 52 weeks, and recently analysts have been lowering their estimates on the stock.
Right now, the stock is a Zacks Rank #5 (Strong Sell), and has seen
consistent decreases earnings estimates. Analysts can move their estimates lower for all sorts of reasons, but the end result is a company with earnings that look to be decreasing. That is the case with UBS.
The 2014 Zacks Consensus Estimate was as high as $1.83 in May of 2013, but that number has fallen throughout all of last year and into 2014. By October, the estimate had slipped to $1.62 and the current forecast is calling for $1.33. That is a decline of more then 27%.
The 2015 Zacks Consensus Estimate is also seeing a decline. The estimate stood at $2.03 in October of last year, but dropped to $1.85 in January and is now at $1.75.
One of the best ways to look at earnings estimates and their impact on stocks is to go to the Zacks site for a graph called the price and consensus graph.
ET Shouldn't Phone Home
When ET wanted to "phone home" telecom stocks were a sure thing. Remember the days of paying for long distance? I sure do, but that isn't the concern of today's generation. They hardly use the phone and much more likely to eat up a texting plan or data consumption.
Deutsche Telekom (DTEGY) saw a significant run up over the last 52 weeks, but again analysts have been lowering estimates. That stock was up 52%, much more than UBS, but it has a better earnings picture.
Only lately have the analysts moved their estimates lower. Throughout almost all of 2013, the Zacks Consensus Estimate held steady at just about $1.00. A few times the number moved a penny one way or the other, but the majority of the year saw estimates looking for $1.00. In March, the consensus slipped to $0.89 and that is where it stands right now.
The 2014 Zacks Consensus Estimate was calling for a little growth from 2014 and was mostly in a range of $1.04 to $1.07. In March, the estimate for 2015 slid to $0.88 and that implies negative year over year earnings growth. That is not what investors want to see.
I should note that T-Mobile, the wireless play for the company, has seen a recent resurgence. I am no telecom analyst, but I can say that the CEO of this company has made a lot of highly visible moves. I happen to be partial to his "crashing" of the AT&T concert at CES, only to be thrown out by security. This guy wasn't just after the press either, he later had the performer play for T-Mobile.
Searching For China
A lot of people have been pointing out stocks from China as being dangerous plays. Some point to frauds and other say the accounting is all wrong. Most people can agree that China wants to slow its roll in terms of economic growth right here, and that may hurt some stocks that rely that growth.
Baidu (BIDU - Snapshot Report) had a terrific run up over the last 52 weeks, notching a gain of more than 80%. This stock has not really followed the EPS estimates like most stocks, so this is not the strongest of plays in my thesis. That said, a lot of momentum plays have been getting hammered of late and this stock is down from a recent high of nearly $190.
BIDU is coming off back to back quarterly earnings misses of the Zacks Consensus Estimate. The company reported on 2/26 and beat on the top-line for the tenth straight quarter and investors ended up liking what they heard from the company as shares traded higher by 5% in the session following the announcement.
Estimates didn't fare as well. The 2014 Zacks Consensus Estimate had been moving higher throughout 2013, but abruptly dropped at in February. As early as May of last year, analysts were looking for $6.02 in EPS, and they were as bullish as late as January of this year when they had adjusted estimates to $6.46. The number dropped to $5.66 in February and is now at $5.40.
The 2015 Zacks Consensus Estimate also saw a decrease. The number was $8.88 in January, but it slipped to $8.10. That still implies a very healthy growth rate of 50% for next year, but again, given the current market, this stock could be in the cross hairs of sellers.
The Ides of March was a bad day for Caesar... and that is an understatement. The next Ides is a bad day for tax payers as those of us that booked significant capital gains need to have our payment in to the IRS by April 15. Some investors will be looking to take some gains and sell stocks to pay that tax bill. Knowing where estimates are going is a good way to pick which stock you plan on selling out of your portfolio to pay that tax bill.
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Brian Bolan is a Stock Strategist
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stocks in the portfolio.
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