3 stocks that could be hit by tax loss selling

30 June is fast approaching. You’re looking at wins and losses for the year, anticipating a large CGT bill after trimming your position in that big winner. Then you remember that dog you’ve been sitting on for a few years. You still like the stock, but you’re down 60% on your purchase price. It’s probably not recovering in the near future. Why not sell it? Offset the big winner. Tax bill sorted.

Of course, everyone loves to get one over on the tax man (legally). So if the story above sounds like you, rest assured, you’re not alone. This phenomenon is so common that it has a name: tax loss selling.

But for those who don’t already own the ‘dog’ (no offense to dogs) tax loss selling can create opportunities, because it sometimes motivates sellers to accept a lower price, before June 30, than they would accept after July 1. There are two ways to profit from this opportunity. First, you could buy a stock with a view to flipping it in the next few months, when, you might hope, the share price had recovered a little in the absence of tax loss selling. And second, you could use share price weakness leading up to June 30 to start accumulating shares in a company that you have long admired, but considered a little too expensively priced.

In that spirit, here are three stocks that I think could be suffering from at least some selling pressure motivated by tax loss selling.

Reece (ASX: REH)

I have long considered Reece a high-quality stock, but it has rarely traded at a price that I was comfortable paying. Having fallen from a high of $29.38 in September 2024 to $16.03 at the time of writing (pre-market open 20 June 2025) – down ~45% – it naturally caught my attention.

Companies with strong track records and brands rarely go on sale, and when they do, it’s generally either due to market conditions (e.g. Covid-crash), or trading conditions. As a result, it’s rarely a comfortable experience buying one. This instance is no different.

Reece has faced poor conditions in housing construction and renovation in both its key markets – Australia and the US. Add a healthy dose of inflation, and it should come as no surprise that the H1 FY 2025 result was a shocker. Revenue was down a modest 3%, but NPAT fell more than 19% (vs prior corresponding period).

Management’s outlook doesn’t suggest a speedy recovery, and neither ABS nor the US Census Bureau points to a significant improvement in their latest data. So it’s fair to assume that recovery could take some time.

That said, given Australia saw net overseas migration of over 650k in the year to June 2024, and only had ~42,000 private sector dwellings commenced in Q4 of 2024, it seems to me that housing construction will need to pick up at some point in the not-too-distant future. Similarly, the US has seen record population growth, but falling residential construction.

Reece does carry a heavy debt load – nearly $920 million of debt, plus over $1 billion of lease liabilities at 31 December 2024. This translated to $29.8 million in interest payments on debt, $22.3 million in interest payments on leases, and $70.3 million in principal repayments on leases for H1 FY 2025. Over the same period, receipts from customers minus payments to suppliers and employees (i.e. what these liabilities are paid from) were ~$378 million.

Free cashflow was just $37 million for the half, which is definitely not good for a ~$10 billion market cap company, but given the depressed state of affairs, just having positive free cashflow is encouraging.

For patient investors, current prices could offer an entry point, though I would absolutely not rule out further falls.

PWR Holdings (ASX: PWH)

PWR Holdings is another company that I’ve always liked, but has never traded at a valuation I’ve been comfortable with.

PWR Holdings designs and manufactures customised cooling solutions for high-performance applications, including Formula One and V8 Supercars, high-performance road cars such as the Mercedes-AMG One and the Aston Martin Valkyrie, and aerospace and defence (A&D).

The company has a very strong position in motorsports, where they derive over 50% of their revenue. They claim to supply cooling solutions to 100% of F1 teams, according to the H1 FY2025 Results Presentation.

In 2025, a few significant challenges have driven the share price to three-year lows.

1. The sale of 2 million shares at $12 per share (near all-time highs) by an entity associated with founder Kees Wheel in March 2024.
2. FY 2024 results and outlook that appeared to disappoint investors.
3. Profit guidance for H1 FY 2025 of $3.2-$3.7 million, compared to $9.8 million in NPAT for the prior corresponding period. 

These results stem from a $38.2 million investment in a new Australian factory (which also comes with a $5.8 million increase in operating expenses for FY26 – see page 13 of the H1 FY 2025 Results Presentation), and a decline in Automotive Aftermarket and OEM segment revenues (page 6 of the same presentation).

On the positive side:

• The new factory should set the company up for several years of growth.
• F1 regulation changes and the addition of an 11th team should encourage investment.
• Motorsports (the largest division) and A&D (the growth engine) have continued to perform well.
• The company is partially shielded from any future US tariffs due to local production in the US.

A&D is the most exciting aspect of the business (unless, like me, you’re a die-hard F1 fan). This segment delivered 79% revenue growth vs pcp in H1 FY 2025, contributing 22% of overall revenue ($13.9 million). In FY 2021, the first FY where A&D was reported as a separate segment, it produced $4.6 million in revenue for the full financial year. Though we can back-solve for FY 2020, where it achieved $2 million in revenue. Over the 12 months to 31 December 2024, A&D produced $27.2 million in revenue. 

In my view, companies like PWR don’t often lose their competitive advantage suddenly and for no apparent reason. The factory investment should be money well spent, and the two key segments continue to perform well and have positive outlooks. I don’t hold the stock currently, but I may buy it before 30 June (though not for at least two days after this article is published).

IPD Group (ASX: IPG)

Finally, a mea culpa. In February, I wrote about IPD Group on Livewire, then covered their half-year results a few weeks later on A Rich Life. During this time, I opened a position in the company at an average price of around $3.80 per share. Today, the stock trades at ~$2.90 per share on the back of weak FY 2025 earnings guidance.

While the Data Centres segment is performing well (revenue +25% on the pro-forma pcp), the Commercial Construction/Buildings segment has performed poorly, bringing the company’s overall results down.

I still hold the stock, and I don’t intend to sell it to reduce my CGT bill, but the performance has been disappointing, and any further unexpected (negative) surprises would likely induce me to sell. Claude explained why he’s lost confidence in IPD Group in this article, and I concur.

I won’t be adding to my position ahead of 30 June.

Disclosure: The author of this article, Patrick Poke, and the editor of this article Claude Walker, both own shares in IPG. Neither Patrick nor Claude own shares in PWH or REH. Neither will trade shares in any of the companies mentioned for at least 2 days following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 343937).