According to Wolfe Research, mutual funds typically begin selling their biggest losers in mid-September to manage their tax liabilities, a practice known as tax loss selling. This strategy is aimed at limiting taxable capital gains distributions to shareholders, thereby reducing the tax burden for retail investors.
Chris Senyek, chief investment strategist at Wolfe Research, noted that avoiding the year's biggest laggards can yield positive returns as these stocks often face increased selling pressure from investors looking to realize capital losses. The S&P 500 has risen over 11% in 2026, but several stocks have significantly underperformed.
Wolfe's updated tax-loss selling basket includes stocks that have dropped more than 20% this year or over the past 12 months. Notably, Nike has seen a decline of over 40% in 2026 and nearly 50% in the last year, with analysts from Truist and JPMorgan downgrading their outlook on the company.
BMO Capital Markets has also rated Nike as underperform, citing issues such as slowing demand and lower margins. Similarly, Campbell's Company has faced a nearly 22% drop in 2026 and over 35% in the past year, attributed to inflationary pressures on packaging and energy costs. Analysts predict continued margin challenges for Campbell's, with constrained pricing flexibility.
Additionally, retail investors are expected to engage in tax-loss selling from mid-November to mid-December, allowing them to offset capital gains with realized losses. Investors should be cautious of the wash sale rule, which could disallow tax deductions if similar assets are repurchased shortly after selling