CIBC analyst’s top tax loss selling candidates might offer value

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Market Factors: “Why I’m not playing along with a compelling new investment idea”

Stocks to watch

CIBC analyst Sid Mokhtari is starting to think about domestic tax loss selling candidates,

“Tax-loss selling activity typically peaks between mid-November and mid-December, although there is no fixed date for these transactions. The key requirement is that trades must be completed before the final trade and settlement day of the year … In previous years, our reports have highlighted that stocks with declines of 20 per cent or more from their 52-week high and negative year-to-date returns to October 15 tend to exhibit follow-through negative momentum and downside share price pressure … Over the past decade, our numerical work shows that the average return for the TSX tax-loss candidates (identified by the above-mentioned criteria) was negative 1.30 per cent between October 15 and December 15 … This report shows there are potentially 32 TSX members with tax-loss candidacy, two of which belong in the TSX-60 large-cap index: CGI Inc. (GIB.A) and Constellation Software (CSU)”

The stocks, some of which might sell off enough to make them interesting as bargain opportunities, are Spin Master Corp, WTW Food Group Inc, North American Construction, Mattr Corp, Pason Systems Inc, Kelt Exploration Ltd, Arc Resources Ltd , Propel Holdings Inc, EQB Inc., TFI International Inc, GDI Integrated Facility Serv, Ag Growth International Inc, Air Canada, ATS Corp, Cargojet Inc, Richelieu Hardware Ltd, Hammond Power Solutions Inc, Dye & Durham Ltd, Docebo Inc, Computer Modelling Group Ltd, Lightspeed Commerce Inc, Tecsys Inc., CGI Inc, Enghouse Systems Ltd, Descartes Systems Grp, Constellation Software Inc, Algoma Steel Group Inc, Interfor Corp, West Fraser Timber Co, Methanex Corp, Canfor Corp and Artis REIT.

Real estate

Desjardins real estate analyst Kyle Stanley is touting industrial REITs,

“As investors look for opportunities in the REIT space, seniors’ housing remains quite attractive; however, with retail sector valuations looking more fair in general, the near-term outlook for Canadian multifamily remaining cloudy and the shift in sentiment towards office appearing fully priced in, we believe the best destination for new capital is the industrial space today. While not without risk and uncertainty given ongoing global trade disputes, our work herein supports a positive demand dynamic supported by market fundamentals bottoming out and an improved new supply outlook (vs recent past), which should translate to the second-strongest earnings growth opportunity by asset class (up 8 per cent, behind seniors’ housing) for 2026. From a growth-adjusted value perspective (PEG), the industrial sub-sector screens best within our coverage universe, with NXR and GRT leading the way”

Conflicting views

I like the tension within Morgan Stanley with the chief U.S. equity strategist Michael Wilson bullish and wealth management chief investment officer Lisa Shalett very much not bullish,

“Signs are increasing that all the dreams being priced into markets may not come true. Specifically, we are wary of concentration of prosperity in the macro data, masking potential problems for consumers and midsize businesses. Cyclicals outperformance, improved market breadth and resurgent small caps all indicate investor reliance on economic reacceleration and broadening. While second quarter GDP was revised higher, some metrics suggest lackluster manufacturing. Ongoing disappointments from private equity partner distributions, meanwhile, may reveal weakness among portfolio companies. Labor markets are also mixed, with consumption increasingly dependent on job creation. Finally, a housing market rebound could be frustrated, as falling mortgage rates and improved pricing may not be enough to counter surging rental-unit supply. Given high valuations and the absence of appealing risk premiums, we are inclined to rebalance to a slightly more defensive posture. Consider adding to health care stocks, swapping some lower-quality credit for intermediate-duration U.S. Treasuries, adding real assets including gold and other precious metals, and continuing to build passive exposure in emerging markets, which are apt to rally on declining US yields and a weaker dollar if US growth falters”

Bluesky post of the day

Diversion

For me this list doesn’t count because Just Can’t Get Enough isn’t on it but … “Science says that these are the 10 catchiest songs ever made” – A Journal of Musical Things