The January Effect is the historical tendency for stock prices, especially small-cap stocks, to rise in the first month of the new year due to depressed prices from heavy selling in the previous month of December.
The selling is due to investors wanting to take tax losses before the end of the year.
The stocks I came up with had the following criteria:
• Stocks down over 75% for the year • Selling below book value • Selling below cash per share • Market caps above $65 million • US based
The list below show shows the company name, the stock symbol, and the industry:
Atyr Pharma
ATYR
Biotech
Korro Bio
KRRO
Biotech
New Fortress Energy
NFE
Oil & Gas
Pliant Therapeutics
PLRX
Biotech
Vivid Seats
SEAT
Internet
Teads Holding
TEAD
Internet
Finally, the results below shows what would happen if you had sold the stocks on January 5, the first trading day after New Year’s week, or January 9, if you had waited until the end of that first full week of the year to sell:
12/16/25
01/05/26
% incr.
01/09/26
% incr.
Atyr Pharma
0.73
0.75
2.74%
0.73
0.00%
Korro Bio
7.78
7.91
1.67%
9.42
21.08%
New Fortress Energy
1.08
1.14
5.56%
1.18
9.26%
Pliant Therapeutics
1.23
1.25
1.63%
1.35
9.76%
Vivid Seats
6.49
7.33
12.94%
6.96
7.24%
Teads Holding
0.66
0.68
3.03%
0.63
-4.55%
AVERAGE % INCR.
4.59%
7.13%
Not too bad a return for a three to four week holding.
Disclosure: Author didn’t own and doesn’t own any of the above. No investment recommendations are expressed or implied.
One long-standing seasonal investment approach is the strategy of buying stocks near year end that have fallen sharply over the prior twelve months and have been pushed even lower by tax-motivated selling. This tactic is rooted in the observation that many investors sell losing positions in November and December to realize capital losses, either to offset gains elsewhere in their portfolios or to reduce taxable income. The resulting wave of selling pressure can temporarily drive prices below levels justified by a company’s underlying fundamentals.
As the calendar year draws to a close, this tax-loss selling can become somewhat mechanical. Portfolio managers and individual investors alike may sell simply because the stock is down, not because new negative information has emerged. In smaller or less liquid stocks, this effect can be especially pronounced, with prices sagging into the final weeks of December as sellers overwhelm a limited pool of buyers. For contrarian investors, these conditions can create opportunities to purchase shares at depressed prices.
The thesis behind the strategy hinges on what is often referred to as the “January effect.” Once the new year begins, the incentive to sell for tax reasons disappears, and in some cases investors even buy back stocks they sold weeks earlier. At the same time, fresh capital flows into the market in January from year-end bonuses, retirement account contributions, and new allocations by institutions. This shift in supply and demand can lead to a rebound in stocks that were heavily sold in December, producing short-term gains for investors who bought during the year-end slump.
However, not every beaten-down stock is a good candidate for a January bounce. The most promising situations are often companies that are down substantially for cyclical or temporary reasons rather than due to permanent impairment of the business. Distinguishing between stocks that are merely unpopular and those that are fundamentally broken is critical. Investors who apply this strategy typically look for balance sheet strength, ongoing profitability, or clear catalysts that could improve sentiment once selling pressure eases.
Risk management is an essential part of this approach. Because the strategy is partly based on market behavior rather than long-term fundamentals, the anticipated bounce may be modest or may not occur at all. Broader market conditions, unexpected news, or continued deterioration in a company’s prospects can overwhelm any seasonal effect. As a result, many practitioners treat year-end tax-loss buying as a tactical, short-term trade rather than a buy-and-hold investment.
There are six stocks are interesting possibilities for a January bounce. They all have the same characteristics, as follows:
• Stocks down over 75% this year • Selling below book value • Selling below cash per share • Market caps above $65 million • US based
The list below show shows the company name, the stock symbol, and the industry:
Atyr Pharma
ATYR
Biotech
Korro Bio
KRRO
Biotech
New Fortress Energy
NFE
Oil & Gas
Pliant Therapeutics
PLRX
Biotech
Vivid Seats
SEAT
Internet
Teads Holding
TEAD
Internet
In summary, buying stocks near year end that are deeply down and further depressed by tax-loss selling is a contrarian strategy that seeks to exploit temporary price distortions. When successful, it can benefit from the easing of selling pressure and renewed demand in January. Like all market strategies, it requires discipline, careful stock selection, and an understanding that seasonal patterns are tendencies, not guarantees.
Disclosure: Author didn’t own any of the above at the time the article was written. No recommendations are expressed or implied.
A wash sale is a situation in tax law where you sell a security at a loss and then repurchase the same or a substantially identical security within a specific timeframe, typically 30 days before or after the initial sale. This repurchase triggers the wash-sale rule, preventing you from claiming the capital loss on your tax return for that year.
Here’s why wash sales are important to investors:
Reducing Tax Liability:
Investors often use tax-loss harvesting to offset capital gains with capital losses, thereby reducing their tax liability. A wash sale unintentionally negates this strategy, as the disallowed capital loss cannot be used to offset other gains.
This can lead to a higher tax bill than anticipated, especially for active investors who frequently buy and sell securities.
Investment Strategy:
The wash-sale rule encourages investors to make well-considered investment decisions based on long-term goals and market fundamentals, rather than short-term tax benefits.
It prevents artificial manipulation of tax returns and promotes responsible investing practices.
Understanding the Rules:
The wash-sale rule applies to most securities including stocks, bonds, mutual funds, ETFs,and options.
The disallowed capital loss is not lost forever, but instead, it is added to the cost basis of the repurchased security. This will reduce the capital gain (or increase the capital loss) when you eventually sell the security again.
There are some <strong>exceptions and complexities</strong> to the wash-sale rule, so it’s crucial for investors to consult with a financial advisor or tax professional to ensure they understand the full implications.
Overall, wash sales are an important aspect of tax law that investors need to be aware of to optimize their tax strategy and make informed investment decisions.
Here is an additional resource that you may find helpful:
Recently, I posted an article about turning tax selling stocks into tax selling bounce stocks, which had four stocks listed.
Remember, at year end, traders and investors dump their losers in order to establish a loss for tax purposes. This activity greatly depresses these stocks more than normal, creating an opportunity for traders to buy these stocks and sell them for a quick profit in early january after they hopefully recover.
Here are several more tax selling stocks worth considering.
This is a list of stocks that are down over 50% during the last six months, have a forward P/E of less than 50, and have market caps in excess of $300 million.
Company
Ticker
Market Cap
Agiliti Inc
AGTI
1.04B
CommScope Holding Co
COMM
393.37M
Driven Brands Holdings Inc
DRVN
2.11B
Green Dot Corp.
GDOT
482.02M
Hawaiian Electric Industries
HE
1.47B
ICU Medical, Inc.
ICUI
2.07B
Methode Electronics, Inc.
MEI
782.50M
NextEra Energy Partners LP
NEP
2.47B
Omnicell, Inc.
OMCL
1.57B
Piedmont Lithium Inc
PLL
472.95M
Shyft Group Inc
SHYF
395.71M
Beauty Health Company
SKIN
403.00M
Petco Health and Wellness Co
WOOF
910.42M
Xponential Fitness Inc
XPOF
387.05M
Yext Inc
YEXT
688.75M
Maybe you can profit from another trader’s losses. Remember that these are low cap stocks and are very speculative. Some might never recover in January.
Disclosure: Author didn’t own any of the above at the time the article was written.
A tax selling stock is a stock that is currently selling for a low price but was trading at much higher levels earlier in the year.
What is Tax Harvesting?
As the year-end approaches, many investors use the strategy called tax harvesting , which is selling stocks the have tanked to offset any gains that may have been established sometime during the year.
With strong selling, the price of stocks that have had big drops tends to fall far more than what would normally take place during the rest of the year.
What are Tax-Selling Bounce Stocks?
So traders and investors are on the lookout for tax selling bounce stocks that are heavily hit, hoping for a little (or big) bounce in January, once the tax selling is over.
Here are some stocks that are down over 75% year-to-date and have market caps in excess of $75 million. They are all based in the United States and re generating positive earnings.
Company
Symbol
Market Cap
P/E
Price
reAlpha Tech Corp.
AIRE
146.29M
428.75
3.43
Ebix Inc.
EBIX
139.05M
28.04
4.5
Eagle Pharmaceuticals Inc
EGRX
75.18M
6.36
5.79
Origin Materials Inc
ORGN
99.19M
1.96
0.69
reAlpha Tech Corp., a real estate technology company with a focus on short-term rentals, operates under two main segments: Platform Services and Investment Services.
Platform Services offer AI-powered products and services to real estate professionals, including data analytics, property management tools, and automated property valuations. Investment Services connect investors with fractional ownership opportunities in short-term rental properties.
The company has recently launched a new AI-powered rental pricing tool and expanded its portfolio to include Miami, Florida. With growing revenue and a focus on artificial intelligence, reAlpha Tech Corp. may be well-positioned to benefit from the booming short-term rental market.
Ebix Inc. is a leading international supplier of on-demand software and e-commerce services, primarily focusing on the insurance, financial, travel, cash remittance, and healthcare industries. The company operates globally, providing end-to-end solutions ranging from infrastructure exchanges and carrier systems to agency systems and risk compliance solutions.
Ebix boasts a comprehensive portfolio of services including software development, consultancy services, life insurance, risk management, health and employee benefits, CRM, and applications software for property and casualty insurance. Its expertise lies in developing and deploying insurance and reinsurance exchanges on an on-demand basis using software-as-a-service (SaaS) enterprise solutions. These solutions cover a wide range, encompassing customer relationship management, front-end and back-end systems, and outsourced administrative and risk compliance services.
Ebix leverages its expertise in consulting, systems design and integration, IT and business process outsourcing, applications software, and web and application hosting to cater to the individual needs of various organizations. This comprehensive approach positions Ebix as a leading player in the on-demand infrastructure exchange market for insurance, financial, and healthcare industries.
Eagle Pharmaceuticals, Inc. is a fully diversified pharmaceutical company dedicated to advancing safe and effective treatments for patients, healthcare providers, and the healthcare system as a whole. The company focuses its efforts on critical care and oncology, developing and commercializing injectable products in areas where there are unmet medical needs.
Eagle’s portfolio consists of four approved products:
Argatroban: An injectable anticoagulant used to treat and prevent blood clots in patients with heparin-induced thrombocytopenia (HIT).
Ryanodex: The only FDA-approved treatment for exertional heatstroke, a life-threatening condition caused by excessive exertion in hot environments.
Belrapzo: A monoclonal antibody approved for the treatment of adult patients with chronic lymphocytic leukemia (CLL) and indolent B-cell non-Hodgkin’s lymphoma (NHL) who have failed or are intolerant to bendamustine and rituximab.
Bendeka: A liposomal encapsulation of bendamustine, a chemotherapy drug used to treat patients with CLL and indolent NHL.
Origin Materials, Inc. is a leading carbon-negative materials company on a mission to enable the world’s transition to sustainable materials. Their innovative platform transforms the carbon found in sustainable biomass, like wood residues and agricultural waste, into useful materials like bioplastics, biofuels, and carbon black. This process eliminates the need for fossil resources and captures carbon in the process, making Origin’s products truly carbon-negative.
Origin’s technology boasts several significant advantages. Their bio-based materials offer comparable performance to traditional petroleum-based materials while significantly reducing greenhouse gas emissions. This makes them attractive to companies seeking to reduce their environmental footprint and contribute to a more sustainable future. Additionally, Origin’s platform is highly scalable, allowing them to produce large quantities of their products to meet the growing demand for sustainable materials.
Currently, Origin is focused on two key markets:
Advanced bio-textiles: These bio-based alternatives to traditional textiles can be used in a variety of applications, including clothing, automotive interiors, and medical textiles.
Carbon black: This essential material is used in a variety of industrial applications, including tires, rubber products, and inks. Origin’s bio-based carbon black offers superior performance and environmental benefits over traditional carbon black derived from fossil fuels.
Origin may be well-positioned to capitalize on the growing demand for sustainable materials.
Hopefully, another investor’s loss can be your gain. However, keep in mind that these are all very low cap stocks and they may have been dropping substantially for a reason.
Disclosure: Author didn’t own any of the above at the time the article was written.
A tax selling stock is a stock that is currently selling for a low price but was trading at much higher levels earlier in the same year, or even earlier years.
When the year end approaches, many investors utilize a strategy commonly referred to as tax harvesting , which is the selling of stocks at a loss to offset any gains that may have been made during the year.
Because of the heavy selling, the prices of stocks that have dropped substantially tend to sink far more than what would usually take place during the rest of the year. Then in January, with the strong selling over with, these stocks can recover somewhat.
So traders and investors are on the lookout for tax selling bounce stocks that are trading at much lower prices, hoping for a bounce in January, once the tax selling is over.
These vehicles, also known as blank check companies, made it easy for private companies to go public. Some of the more well known SPACs include DraftKings (DKNG), down 49% year-to-date, and Virgin Galactic (SPCE), down 66%.
Unfortunately, the returns haven’t been so great, with many of them experiencing losses of over 90% from their highs.
Here are some additional SPACs that are down over 50% year-to-date. You will notice that several of them are electric vehicle companies.
Company
Symbol
YTD Return
Arrival
ARVL
-96%
Shift Technologies
SFT
-93%
IronNet
IRNT
-92%
Ree Automotive
REE
-91%
Canoo
GOEV
-82%
BuzzFeed
BZFD
-80%
Lucid
LCID
-77%
AppHarvest
APPH
-77%
WeWork
WE
-75%
SoFi
SOFI
-73%
Lordstown Motors
RIDE
-59%
Fisker
FSR
-54%
Polestar
PSNY
-50%
A couple things to remember. There is no guarantee that these stocks will bounce back in January, as there is usually a reason the stocks dropped so much in the first place.
Also, timing is everything with these tax-selling stocks. Sometimes the sellers are done selling in mid-December, sometimes they wait until year end.
Hope you get a bounce in your portfolio.
Disclosure: Author didn’t own any of the above at the time the article was written.
We recently published an article on tax selling stocks, which listed several stocks that had dropped significantly this year. Tax selling stocks are ones which are overly depressed in price due to stockholders wanting to take advantage of their capital losses before year-end. Often, these stocks bounce in January when the selling pressure is off.
Some stock traders like to look for additional criteria when they choose which tax selling stocks to buy, and one that is popular is below-cash stocks. These are stocks that if you divided the company’s total cash by the number of outstanding shares, that cash value exceeds the current stock price.
In other words, the stock is trading below the amount of cash available per share. With that much cash, it is hard for a company to go out of business within a month. In addition, it sometimes makes these stocks takeover opportunities.
Of course, there is no guarantee that these stocks will bounce in January. They could continue to drift downward or stay around the same price for a long time.
Here is a list of non-biotech stocks that are down over 50% year-to-date and are selling below cash per share. Also, all of these are selling below $7 per share. In addition, many of them have had increasing revenues over the past few years.
AFIB
AQB
ASTC
BTBT
CMMB
CNTX
DSS
EKSO
FKWL
FNHC
FVE
LCI
MAPS
MYPS
NUWE
ONVO
ROOT
SLDB
VIVE
Please keep in mind that these are extremely low cap stocks and are therefore extremely speculative.
Disclosure: At the time the article was written, author owned AFIB AQB ASTC BTBT CMMB CNTX DSS EKSO FKWL FNHC FVE LCI MAPS MYPS NUWE ONVO ROOT
If you are wondering what a tax selling stock is, it is a stock that is currently selling for a low price but was trading at much higher levels earlier in the year.
As the year-end approaches, many investors employ the technique called tax harvesting , which is the selling of loser stocks to offset any gains that may have been established during the year.
With all the heavy selling, the price of the stocks that have had big drops tends to tank far more than what would normally take place during the rest of the year.
So traders and investors are on the lookout for tax selling bounce stocks that are heavily hit, hoping for a little (or big) bounce in January, once the tax selling is over.
Here are some stocks that are down over 50% year-to-date and have market caps in excess of $300 million. They are all based in the United States and have forward price to earnings ratios less than 50.
Bit Digital, Inc.
BTBT
Chegg, Inc.
CHGG
CleanSpark, Inc.
CLSK
GrowGeneration Corp.
GRWG
WM Technology, Inc.
MAPS
PLAYSTUDIOS, Inc.
MYPS
Proto Labs, Inc.
PRLB
Sunlight Financial Holdings Inc.
SUNL
Maybe someone’s tax losses can be your tax stock gains.
Disclosure: Author didn’t own any of the above at the time the article was written.
A tax selling stock is a stock that is currently selling for a low price but was trading at much higher levels earlier in the year.
What is Tax Harvesting?
As the year-end approaches, many investors use the strategy called tax harvesting , which is selling stocks the have tanked to offset any gains that may have been established sometime during the year.
With strong selling, the price of stocks that have had big drops tends to fall far more than what would normally take place during the rest of the year.
So traders and investors are on the lookout for stocks that are heavily hit, hoping for a little (or big) bounce in January, once the tax selling is over.
What is Cash per Share?
But if you can find a stock that is selling below cash per share, you have a double bonus. The cash per share is the amount of cash the company has divided by the number of shares.
So if you are looking for these types of stocks, see below for a selection of some that have dropped by over 50% year-to-date. Most have low market capitalizations so they should be considered speculative. However, all of these stocks are selling below cash per share.
What is the Price to Book Ratio?
In addition, they all have a price to book ratio of less than one. The Price toBook ratio, in simple terms, is what each share would be worth if the company went out of business today and all assets sold off. The lower the ratio, the better. And if the number is less than one, it means that each share is worth more than the assets.
Here is the list. Dropped more than 50% this year, selling below cash per share, low priced to book ratio, and a price to sales ratio of less than one. All are United States based companies.
List of Tax Selling Stocks
Acorda Therapeutics, Inc.
ACOR
Peabody Energy Corporation
BTU
Cumulus Media Inc.
CMLS
Express, Inc.
EXPR
Francesca’s Holdings Corporation
FRAN
Hallmark Financial Services, Inc.
HALL
KLX Energy Services Holdings, Inc.
KLXE
Nine Energy Service, Inc.
NINE
PBF Energy Inc.
PBF
Steel Connect, Inc.
STCN
United Insurance Holdings Corp.
UIHC
Just remember, these stocks may be trading at a very low price for a reason. Happy investing.
Many of the cannabis related stocks have been burned during the last year, which makes them possible tax sale opportunities.
A tax selling stock is a stock that is currently selling for a low price due to heavy year-end selling for tax purposes, but was trading at much higher levels earlier in the year.
As the year-end approaches, many investors employ the technique called tax harvesting , which is the selling of loser stocks to offset any gains that may have been established during the year.
With all the heavy selling, the price of the stocks that have had big drops tends to drop far more than what would normally take place during the rest of the year.
So traders and investors are on the lookout for stocks that are heavily hit, hoping for a significant bounce in January, once the tax selling is over.
So if you are looking for these types of stocks, here is a selection of some marijuana stocks that have dropped by over 15% year-to-date, with five of then sinking by more than 50%.
Stock
Symbol
YTD Return
Aphria
APHA
-17%
Aurora Cannabis
ACB
-28%
Cannabis Sativa
CBDS
-78%
Canopy Growth
CGC
-28%
Cronos
CRON
-25%
Hexo
HEXO
-38%
Mentor Capital
MNTR
-60%
Sundial Growers
SNDL
-55%
Terrra Tech
TRTC
-59%
Tilray
TLRY
-69%
Hopefully some of these stocks will get high in January.
Disclosure: Author owns CBDS, CGC, MNTR, and has a long option position in ACB.
