This year has the third-highest number of stocks ripe for potential tax-loss selling dating back nearly two decades, according to CIBC Capital Markets.
There are 118 names, including 17 that are listed on the TSX 60 large-cap index, that rank poorly on CIBC's scoring process, meaning they could be susceptible to tax-loss selling pressure in the coming weeks.
Scroll down for the full list of CIBC's candidates for tax-loss selling
The only other years dating back to 2004 that had more candidates were 2008 and 2015.
Tax-loss selling is a strategy investors use to offset taxes on investment gains. It works by intentionally selling underperforming stocks to use the losses to offset their taxable capital gains for the year. A key rule with this strategy is investors cannot buy that same security in the 30-day period before and after the stock sale, or else it's considered a superficial loss and the investor won't be able to use the loss to offset capital gains.
"In our estimation, 26% of the TSX index (measured by market-cap weight) may be susceptible to tax-loss selling pressure, with heavier concentration coming from Materials (primarily golds) and Real Estate GICS sectors," CIBC said in the report, which was released on Monday.
From the beginning of the year, the S&P/TSX Composite Index is down nearly six per cent as higher interest rates, fears of an economic recession and runaway inflation have dented investor sentiment. At the lowest point this year, the Canadian benchmark was down roughly 14 per cent.
CIBC identified consumer companies such as Canada Goose Holdings Inc. (GOOS.TO GOOS), Empire Co Ltd. (EMP-A.TO), Maple Leaf Foods Inc. (MFI.TO) and BRP Inc. (DOO.TO) as prime tax-loss selling candidates.
Other financial firms that were listed include Brookfield Asset Management Inc. (BAM-A.TO BAM), Canaccord Genuity Group Inc. (CF.TO), EQB Inc. (EQB.TO), Home Capital Group Inc. (HCG.TO), Laurentian Bank of Canada (LB.TO) and Great-West Lifeco Inc. (GWO.TO).
Numerous REITs and base metal companies were also named potential tax-loss selling candidates.
Potential tax-loss selling candidates in the industrial subsector were Air Canada (AC.TO), CAE Inc. (CAE.TO CAE), Cargojet Inc. (CJT.TO), GFL Environmental Inc. (GFL.TO GFL), and NFI Group Inc. (NFI.TO).
As for the heavyweight energy sector, which has had a massive run-up this year, CIBC says only three names might be good options for tax-loss selling — Denison Mines Corp. (DML.TO DNN), Parex Resources Inc. (PXT.TO) and Parkland Corp. (PKI.TO).
"It is a challenging exercise to say with precision how we should qualify and measure tax-loss candidates (what percentage of decline, with what starting point during the year)," the report said.
"Nevertheless, our previous years' studies show the stocks that have declined by 20% or more from their 52-week highs and that have a negative return YTD to October 31 are likely to show more downside pressure through the first two weeks of December (tax-loss selling period)."
The report also notes stocks that typically come under pressure in the final weeks of the year tend to do well in January, likely when investors are buying back those companies after waiting out the superficial loss window.
Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.