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Let the Dumpster Diving for Stocks Begin

NEW YORK (TheStreet) -- It's time to begin the harvest: the tax-loss harvest, that is. By selling the losers, investors can reduce taxes by offsetting gains in what has been a stellar year for the markets.

It looks to be a big year for capital gains -- look no further than the world of mutual funds. For example, a couple of the Janus Funds, Janus Twenty (JNTFX) and Janus Venture (JAVTX), have announced preliminary year-end distributions in excess of 20% of the funds' net asset value. Ouch!

Long-term capital gains rates will be significantly higher this year for some taxpayers -- up to 23.8%, if you include the new Medicare surcharge for high-income taxpayers. So the pressure will be on over the next two weeks to dump what needs to be dumped. Of course, this may create some opportunities. Selling the companies that are down for the year will put even more pressure on their prices. So I, and many other value-oriented "dumpster divers," will be on the lookout between now and early January for the bargains that have been so elusive in the past year.

I am searching on a couple of fronts. First, I want quality companies with margins or assets that are down more than 10% over the past year. Wood products and timber name Rayonier (RYN - Get Report) looks interesting. The stock is down about 17% year to date. Much of the damage came from a 20% one-day haircut after the company reported very disappointing third-quarter results. It was an ugly quarter. But with a 4.4% dividend yield and assets that include 2.1 million acres of land, this is a quality company that might get a bit cheaper.

RYN Chart
RYN
data by YCharts

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SYM TRADE IT LAST %CHG
AEO $16.72 -0.06%
JAKK $9.30 -0.64%
PRXI $2.00 -4.76%
RYN $23.22 3.20%
AAPL $112.00 2.10%

Markets

Chart of I:DJI
DOW 16,654.77 +369.26 2.27%
S&P 500 1,987.66 +47.15 2.43%
NASDAQ 4,812.7080 +115.1720 2.45%

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