A number of blue-chip names have seen losses this year, creating opportunities to offset some of the gains elsewhere in the portfolio.primeimages/iStockPhoto / Getty Images
Back in April, as investors digested U.S. President Donald Trump’s tariffs and the S&P 500 flirted with a bear market, some investors may have taken solace in the opportunities for tax-loss selling.
But as the tax harvesting season gets underway, many of those opportunities have vanished. Both the S&P 500 and S&P/TSX Composite Index have risen steadily since the “Liberation Day” announcements to sit close to all-time highs. It’s a good problem to have.
However, the drivers for gains in both indexes have been narrow, with gold miners leading the TSX higher and a handful of tech stocks driving gains in the U.S.
That means several blue-chip names have seen losses this year, creating opportunities to offset some of the gains elsewhere in the portfolio.
Selling season
Investors have until Dec. 30 to sell securities and book losses against capital gains in their taxable accounts.
The Canada Revenue Agency’s superficial loss rule prohibits repurchasing a stock or fund within 30 days of a tax-loss sale, or from buying the same security up to 30 days before the sale.
Investors can still buy a different stock or fund in the same industry sector during that period (provided the ETF doesn’t track the same index or has sufficiently different holdings).
A report this week from TD Securities makes this easy by highlighting some of the stock and ETF losers eligible for tax-loss selling, as well as sector ETFs that could be picked up as replacements.
Replacing the losers
The S&P/TSX Composite Index is up by more than 20 per cent this year, but key names across sectors have underperformed.
Three of those in the industrial sector are Thomson Reuters Corp. TRI-T, Canadian National Railway Co. CNR-T and Air Canada AC-T. TD Securities points to sector ETFs, including iShares S&P Global Industrials Index ETF XGI-T and BMO Equal Weight Industrials Index ETF ZIN-T, with “decent weights” in these stocks.
Stocks that were down in the energy sector include Canadian Natural Resources Ltd. CNQ-T and Tourmaline Oil Corp. TOU-T. For similar exposure, the report lists iShares S&P/TSX Capped Energy Index ETF XEG-T, Global X Canadian Oil and Gas Equity Covered Call ETF ENCC-T and Ninepoint Energy Fund NNRG -NE.
For tech losers Constellation Software Inc. CSU-T and Descartes Systems Group Inc. DSG-T, the report lists iShares S&P/TSX Capped Information Technology Index ETF XIT-T as a substitute, while Alimentation Couche-Tard Inc. ATD-T makes up one-quarter of iShares S&P/TSX Capped Consumer Staples Index ETF XST-T.
In the U.S., investors can take advantage of losses of more than 20 per cent this year from companies across sectors, the report says, including Lululemon Athletica Inc. LULU-Q, Comcast Corp. CCZ-N, Apollo Global Management Inc. APO-A-N, General Mills Inc. GIS-N, UnitedHealth Group Inc. UNH-N and Salesforce Inc. CRM-N.
Swapping ETFs
“Strong equity and fixed income markets have created limited capital loss harvesting opportunities in ETFs this year,” the TD Securities report says.
Energy covered-call ETFs and Canadian long Treasury bond ETFs offer a few options for ETF investors to sell losers, it says, while warning some funds may not be considered different from a tax-loss harvesting perspective because they hold the same securities.
Must reads
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