How to use the tax-loss selling occurring now to pick up quality stocks on the cheap

Tax‑loss harvesting is in full swing across brokerages, with heavy market sell orders as advisors lock in year‑to‑date losses to offset earlier gains and comply with the 31‑day wash‑sale rule, a flow likely to persist into year‑end and create significant technical distortions. Those forced sales are producing potential buying opportunities in quality, dividend‑paying large caps — examples cited include Dogs of the Dow names Verizon, Chevron, Amgen, Johnson & Johnson, Coca‑Cola and IBM, and 52‑week lows such as Procter & Gamble, Adobe, ADP, Kimberly‑Clark, Kraft Heinz and Charter — where selectivity around balance sheet strength and cash flow matters. Kevin Simpson (Capital Wealth Planning, manager of DIVO) specifically flags IBM as an attractive pick: roughly 50% of revenue from software/hybrid cloud/AI, software revenue up ~9% last quarter, about $13.5bn of free cash flow and ~25x forward earnings, suggesting a cash‑rich, AI‑levered large‑cap available at a discount amid year‑end tax selling.

Analysis

Brokerage desks report large-scale tax-loss harvesting now underway, with advisors placing market orders to lock in year-to-date losses to offset earlier gains (notably realized in April) and to comply with the 31-day wash-sale rule; these flows are expected to persist through year-end and create pronounced technical distortions. The author frames this as forced selling rather than fundamental deterioration, noting that many established large-cap names are being sold simply for tax reasons rather than because of broken business models.

The piece highlights specific repeatable opportunities in high-yield, blue-chip “Dogs of the Dow” and other 52-week-low names—Verizon, Chevron, Amgen, Johnson & Johnson, Coca-Cola, IBM, Procter & Gamble, Adobe, ADP, Kimberly-Clark, Kraft Heinz and Charter—while warning that selection should be based on balance-sheet strength, free cash flow, and dividend support rather than price alone. The commentary cautions against indiscriminate “buying losers” but argues that disciplined investors can exploit temporary dislocations.

Kevin Simpson (manager of the Amplify CWP Enhanced Dividend Income ETF) identifies IBM as a personal buy, citing that ~50% of revenue is now software/hybrid cloud/AI, software revenue rose almost 9% last quarter, free cash flow was about $13.5 billion, and the stock trades near 25x forward earnings with a yield just over 2%, supported by z17 mainframe refresh and Red Hat contributions. The tone is mildly positive but cautious, implying opportunities for long-term accumulation rather than speculative trading.

Key Decisions for Investors

• Consider selectively accumulating high-quality, dividend-paying large caps that have been sold for tax reasons after verifying strong balance sheets and sustainable free cash flow, rather than buying solely on 52-week lows
• Evaluate IBM as a tactical long-term addition given ~9% software growth last quarter, roughly $13.5bn in free cash flow and ~25x forward earnings, but account for its ~2% yield and ensure it fits your AI/hybrid-cloud exposure
• Use limit orders and staged buying to avoid executing into heavy market-order tax selling and manage sizing to reflect potential short-term volatility from year-end flows
• Monitor the 31-day wash-sale window when harvesting losses and avoid reconstituting positions too quickly, and prioritize names with durable capital-return profiles (the cited Dogs such as VZ, CVX, AMGN, JNJ, KO) for income-oriented allocations