Wolfe Research identifies stocks at risk of sharp declines this fall due to mutual fund tax-loss selling. Companies like Nike and Campbell’s Company are highlighted as potential candidates for this year-end strategy.
Tax-loss selling allows funds and individual investors to offset capital gains, potentially reducing their tax bills. Investors are advised to be aware of the wash sale rule to maximize tax benefits.
Mutual funds are gearing up for their year-end selling, a move that could trigger significant drops for certain stocks, according to a recent analysis by Wolfe Research. September, October, and December are prime months for these funds to liquidate their worst performers, a strategy known as tax-loss selling. This practice allows funds to offset capital gains, thereby reducing their tax liabilities and, consequently, the tax burden for their retail investors.
"Historically, avoiding the biggest year-to-date losers has been a positive alpha generating strategy heading into the last several months of the year," explained Chris Senyek, chief investment strategist at Wolfe Research. "The reason is that the market's biggest laggards can be subject to selling pressures by investors looking to harvest capital losses and/or provide 'window dressing' for their annual reports," Senyek added.
While the S&P 500 has seen a more than 11% increase in 2026, some stocks have significantly lagged behind. Wolfe Research has updated its tax-loss selling basket, which includes stocks that have fallen over 20% this year or in the last 12 months, or have underperformed their 12-month volume-weighted average price by at least 20%.
Stocks to Consider Selling
Among the stocks flagged by Wolfe Research is Nike. The athletic apparel giant has experienced a rough year, with shares plummeting over 40% in 2026 and nearly 50% over the past 12 months. The company's bleak outlook for the first half of its fiscal year, ending in November, which anticipates little change in earnings, has contributed to analyst downgrades from firms like Truist and JPMorgan. BMO Capital Markets even initiated coverage with an 'underperform' rating, citing "slowing lifestyle demand, a full China distribution reset, and structurally lower margins" that push a full EPS recovery to fiscal year 2031.
Another company on the list is Campbell's Company. Shares of the food producer, known for its canned soups and Pepperidge Farm products, have dropped nearly 22% in 2026 and over 35% in the last year. Stephens analyst Jim Salera noted that the company is battling inflationary pressures, particularly in packaging and energy costs. He recently downgraded Campbell's to 'equal weight,' stating, "Outside of promotional spend, margins will likely see continued inflationary headwinds driven by energy costs along with packaging." Salera anticipates that with limited pricing flexibility, gross margins are more likely to decline in FY27 rather than improve, even with accelerated cost-saving initiatives.
Tax-Loss Selling for Retail Investors
The opportunity to benefit from tax-loss selling isn't limited to mutual funds. Retail investors can also engage in this strategy, particularly during a second wave of selling from mid-November to mid-December. By selling underperforming assets, individual investors can realize capital losses to offset capital gains in their portfolios. If losses exceed gains, up to $3,000 can be used to reduce ordinary income, with any remaining losses eligible for carryforward to future tax years.
Investors should be mindful of the wash sale rule. This IRS regulation disallows claiming a loss on a security if a substantially identical one is purchased within 30 days before or after the sale. Careful planning is essential to ensure the tax benefits are realized without violating this rule.
