A solid stock market performance in the about-to-close financial year has raised tax bills for many investors. So selling pressure in the markets is expected to be higher today than in the last few years.
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So which are the ideal stocks that could witness significant selling pressure? Before we zero-in on a few, let's discuss how it works.
Long-term capital gains are often taxed at a lower rate than short-term capital gains. Furthermore, such taxes are paid only on the realization of capital gains (i.e., when the investment is sold).
This is one of the reasons that the stock market often plummets toward the end of the financial year as investors sell off their losing positions to offset the capital gains and lower their tax bills.
So stocks that have gained substantially in the past year or so and look overpriced now may witness selling pressure. Moreover, investors offload those stocks that have less potential to appreciate further.
We have highlighted three stocks here that saw substantial gains over the last 52 weeks, but have been witnessing negative earnings estimate revisions recently. Moreover, they don’t have a favorable Zacks Rank.
Stocks to See Selling Pressure
Intuit Inc. (INTU - Free Report) : This Zacks Rank #3 (Hold) technology stock generated a modest 52-week return of around 14%. However, it started 2014 on a sluggish note and its performance deteriorated further in February.
It has delivered two negative earnings surprises in the last four quarters with an average miss of 152.9%. Moreover, over the last 60 days, 8 estimates for fiscal 2014 were revised downward, pushing the Zacks Consensus Estimate down by 1.3% to $3.13.
H&R Block, Inc. (HRB - Free Report) : This service sector stock carries a Zacks Rank #5 (Strong Sell). This is because the stock witnessed four downward revisions for fiscal 2014 over the last 60 days. The Zacks Consensus Estimate went down by 3% to $1.62 over the same time frame.
H&R Block has generated a return of 1.41% over the last 52 weeks. Recently, the company has been on a roller coaster ride with a negative year-to-date return of 4.6%
Baidu, Inc. (BIDU - Free Report) : Though the stock currently carries a Zacks Rank #5, it has had a terrific run over the last 52 weeks, scoring a gain of more than 70%. However, similar to many other technology stocks, BIDU had a moderate start in 2014 and finally resulted in a negative year-to-date return of 14.6%.
The Zacks Consensus Estimate for 2014 went down 16.7% to $5.38 with 8 estimates going down over the past 60 days.
So what you are waiting for? If you hold any of these stocks, this is the right time to offload them. Of course, it depends on your holding period of these stocks. But in any case, we don’t see these stocks gaining in the near term as they don’t have a favorable Zacks Rank.