January bounce could happen for Intel, four other choices

KICKING someone while they’re down is unsportsmanlike. But it happens every year in the stock market. In November and December, investors often pummel the stocks that have declined in the first 10 months of the year. Why? For tax reasons. Investors sell their losers to establish tax losses, which are useful in offsetting capital gains and lowering the tax burden.

This effect, called tax loss selling, will happen though tax rates may change under President-elect Joe Biden. The taxes you pay in April 2021 for tax year 2020 are already set in stone, and if you can lower them, you probably will.

For investors, this time of year often brings opportunities because tax loss selling may pound some stocks down below their true value. Here are five stocks that I believe are timely to buy in the next month or so, with prospects for a bounce in January and beyond.

Intel

Down 22 percent this year is Intel Corp., the largest U.S. semiconductor manufacturer. I regard it as a good medium-risk pick, particularly suited for dividend-conscious investors. Intel has increased its dividend in 14 of the past 15 years, and the stock yields 2.9 percent in dividends.

No fewer than 41 Wall Street analysts follow Intel. Twenty of them recommend it, and 21 of them don’t. That’s not a bad thing, in my view. It leaves room for “upgrades,” which may boost the stock. Over the past 10 years, Intel has increased its revenue at an 8 percent annual clip and earnings at an 11 percent pace.

Farmers & Merchants

If you don’t mind paying $6,500 per share for a stock, I see merit in Farmers & Merchants Bank of Long Beach (FMBL). This banking company has no debt and has posted a profit in 16 straight years. A return on assets of 1 percent or better is considered good for a bank; Farmers beats that regularly

No Wall Street analysts cover it, but that’s OK: Analytical neglect is a positive factor, some academic studies show.

World Fuel

World Fuel Services Corp. (INT), based in Miami, provides jet fuel and gasoline to aviation companies, gas stations, seaports and wind turbine operators. It has been profitable in 14 of the past 15 years, but it seems mature. The revenue growth rate for the past five years is about 2 percent.

With the pandemic crippling travel, the stock has been slaughtered this year, down 37 percent. Given the prospect of a vaccine being widely available sometime in 2021, I think it has comeback potential.

G-III Apparel

Risky but interesting is G-III Apparel Group Ltd. (GIII), a clothing manufacturer. As I said last week, G-III’s biggest problem is reliance on department stores as a sales channel.

The COVID-19 pandemic has been murder on department stores. But G-III has strong brands, including the Donna Karan and DKNY brands, which its owns, and Calvin Klein, Tommy Hilfiger, and Karl Lagerfeld brands, which it licenses. G-III shares are down 51 percent this year.

Kimball International

With more people working from home, who needs office furniture? That’s why Kimball International Inc. (KBAL) is down about 45 percent this year.

I don’t know how long the headwinds will blow in Kimball’s face, but the company has an enviable long-term record.