Here it is – the end of another year. All the gifts have been given and the good ones broken. The wrapping paper is in the trash and the leftover turkey carcass is jammed into the fridge waiting patiently to be thrown away.
Now, as people do, your holiday thoughts turn to maximizing your tax loss selling. And, like all Outsiders, you also start to wonder how you should make some fast money by buying some oversold small-cap that was unfairly crushed due to this annual event.
What is tax loss selling?
Tax loss selling, or tax harvesting, is when you sell a stock that you lost money on. You are eligible to put up to $3000 of a loss against a taxable gain.
If you are like me, you have some long-shot losers in your portfolio which don’t look like they are coming back. It is a good time to sell them before the end of the year so you can write it off against your 2024 tax bill.
The flip side of this is that many other people will dump good stocks that are down for the same reason. Tax loss selling can punish a good stock and make for some great buys. And if it is a solid stock, many people (or funds) will pick up the company on the first trading day of the New Year because they want it in their portfolio.
Got it? Good.
So for our little exercise, we are looking for small-cap stocks because they move more and have a better chance of being down this week.
One stock that fits the bill is Accolade Inc. (ACCD).
The stock went public in 2020 at about $30 a share, jumped to $60 during COVID, and has since sold off to $3.42 a share where it has built a solid base since June
The first sell-off into this year was because it was overvalued and a COVID stock. In June it reduced its earnings estimates by 5% for the year and was punished by more than 60% of its share price. This is clearly overdone.
Accolade’s services large employers who self-insure their employee’s health care insurance.
This business segment is about 75% of total revenues. Its customers are generally midsized companies with over 1,000 people.
This segment also partners with various medical service providers to provide health care to the employees. It has a service called Second MD, which provides second opinions to employees needing expensive health care. This segment currently has around 1,200 employers as customers and covers more than 12 million people. The current renewal rate is about 90%. It’s a viable business that makes things easier and better for its customers.
Accolade also has a smaller segment called PlushCare, which provides telehealth to consumers. Revenue is expected to be over $100 million this year and it is growing at 20% this year.
AI
ACCD has also ventured into AI for back office, physician notes, and other clinical data.
Revenue was up 14% in the first six months. The burn rate was $53 million – down from $71 million last year. The company has $234 million in cash and expects to be cash flow positive by the end of the fiscal year. Fiscal year Q4 is historically the strongest quarter due to new contracts being signed in January. The fiscal year for ACCD ends in February and Q1 earnings should be a catalyst for share price appreciation.
Furthermore, much of the costs has been due to IPO payouts to management post-IPO. This was paid out the first few years and will be cut dramatically going forward.
This stock is a contrarian dream. The chart shows a MACD bullish cross and solid support. Healthcare is out of fashion due to RFK Jr. but that’s overdone. COVID stocks have been beaten up. Tax loss selling is in play.
When stocks go from losing money to making money the share price spikes. Accolade looks like a solid speculation going into the new year. Buy it on New Year’s Eve at the market.
All the best,
Christian DeHaemer
Outsider Club
Doom Porn:
https://www.outsiderclub.com/the-next-crisis/
More Doom:
https://www.outsiderclub.com/dow-theory-confirmed/
Buy the Asset Side of the “K” Economy
: https://www.outsiderclub.com/the-best-boomer-stock-to-buy/
