Dec 20, 2021
CIBC offers 52 potential tax-loss bargain buys
‘Tis the season for tax-loss bargain hunting and the Canadian Imperial Bank of Commerce’s equity research team is offering a few dozen ideas.
Selling underperforming investments for a loss – thus allowing investors to offset taxes on their capital gains - usually occurs between late November and mid-December. Afterward, “bargain hunters may use the weakness as an opportunity to pick up candidates that are trading near their 52-week lows,” explained CIBC Chief Market Technician Sid Mokhtari in a research report published on Sunday.
The report highlights 52 TSX-listed companies that could make good tax-loss sale and repurchase candidates for investors to consider before Dec. 29, which is the last transaction day of 2021 to record capital gains or losses. For those interested specifically in larger companies, CIBC recommends checking out Barrick Gold Corp. (ABX), Wheaton Precious Metals Corp. (WPM), cheese maker Saputo Inc. (SAP) and cannabis grower Canopy Growth Corp. (WEED).
More than half of the companies on CIBC’s list are miners (30 of 52) and gold miners in particular comprise the majority of them. CIBC also recommends other cannabis companies such as Tilray Inc. (TLRY), Village Farms International Inc. (VFF), Aurora Cannabis Inc. (ACB) and Cronos Group Inc. (CRON). The TSX’s health care subgroup, which is largely made up of pot producers, is the lagging performer this year, with a negative return of 23 per cent as of mid-day on Monday.
Several renewable energy companies, such as TransAlta Renewables Inc. (RNW), Ballard Power Systems Inc. (BLDP) and Brookfield Renewable Energy Partners LP (BEP-U) also made the list.
Over the past 15 years, the CIBC report said qualified baskets of tax-loss candidates have posted positive returns during the so-called “January effect” when investors “pick up beaten down stocks that have better fundamental backing while trading near their 52-week lows.” Those stocks, the report said, have posted average positive returns of 4.4 per cent between Dec. 15 and Jan. 15 and have outperformed the broader TSX by nearly three full percentage points.