How to use the tax-loss selling occurring now to pick up quality stocks on the cheap
It’s that time of year again: the annual tax-loss harvest. It’s happening across the brokerage firms right now, and it’s happening in size. Advisors are locking in losses to offset the big realized gains from earlier in the year, especially back in April when clients trimmed their winners and booked profits. We know from trading partners across the Street that most of the sell orders for stocks with year-to-date losses are coming in as market orders, which we interpret as tax loss sellers just looking to get out – if only for 31 days as the IRS dictates. Between now and year-end, these heavy flows are likely to continue. Portfolios are being repositioned, stocks are being rotated out for the 31-day wash-sale rule, and you’re getting a lot of tax-selling. Some good companies are getting thrown out just because they’re sitting in the red — not because anything’s necessarily broken from a fundamental perspective. To be clear, I’m not a fan of buying losers. A 52-week low is not a buy signal — most names hit new lows for a reason. But this year might present some opportunities because there’s a lot of technical and tax-driven distortion out there. We had a strong start to 2025, a narrow leadership group – led by the “Magnificent Seven,” and now we’re seeing potential dumpster-diving opportunities — temporary dislocations in quality names. Think about what’s showing up on the radar right now: the “Dogs of the Dow” for 2025 — your highest-yielding blue chips — include names like Verizon , Chevron , Amgen , Johnson & Johnson , Coca-Cola and IBM (we own most of these companies). These aren’t speculative trades. They’re global franchises yielding between 3% and nearly 7%. VZ CVX YTD mountain VZ and CVX year to date And then, if you look beyond the ‘Dogs’ — some of tickers on the 52-week-low list you could find decent companies that might be having an off year. You’ve got Procter & Gamble , which is actually both a Dog of the Dow and a new-low name; Adobe , ADP , Kimberly-Clark , Kraft Heinz , and Charter Communications — all making fresh lows. Historically, these haven’t been super high-risk tickers — these are established companies. This exercise shouldn’t be about trash picking — it’s about sifting through temporary weakness for quality that’s been unfairly sold. If you can find a name with a solid balance sheet, strong free cash flow, and a dividend that pays you to wait, it may be worth a look while everyone else is selling it for tax reasons. And that brings me to one of those names I’m actually buying: IBM . IBM YTD bar IBM in 2025 IBM is a current Dog of the Dow yielding just over 2%, and I think it’s quietly turning into one of the more interesting opportunities in large-cap tech. The market still treats IBM like an old-school mainframe company, but that’s outdated. Nearly half their revenue now comes from software, hybrid cloud, and AI services. In the last quarter, software revenue was up almost 9% and free cash flow came in around $13.5 billion. At roughly 25 times forward earnings, you’re getting a high-yielding, cash-rich, AI-levered enterprise name at a discount — and that’s not something you can say about most of mega-cap tech right now. The z17 mainframe refresh is ramping up, Red Hat continues to deliver, and enterprise AI adoption is just starting to flow through. If anything, the year-end weakness we’ve seen looks like an opportunity. “Harvesting” this year doesn’t mean chasing broken stories. It means recognizing that forced, tax-driven selling creates inefficiencies — and if you’re disciplined, it can let you sometimes pick up quality companies like IBM at cheaper valuations. For long-term investors, I think this is the kind of setup that can quietly compound while the market’s busy watching the shiny objects. Kevin Simpson is founder and CEO of Capital Wealth Planning and manager of the Amplify CWP Enhanced Dividend Income ETF (DIVO) .
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