Have a Few Duds? How to Be Smart About Investment Losses (Tax-Loss Strategies for Canadians)

No matter how carefully Canadians build their portfolios, sooner or later every investor ends up holding a few disappointments. The question isn’t whether you’ll encounter losing positions — it’s how you choose to handle them. 

Smart investors know that even a “dud” can offer hidden opportunities, whether through tax planning or contrarian long-term investing. The key is learning to separate genuinely broken investments from temporarily weakened ones.

Understanding the mechanics — and purpose — of tax-loss selling

In Canada, tax-loss selling is most commonly executed late in the year, typically through November and December. The goal is to sell losing positions in non-registered accounts to generate capital losses that can offset realized capital gains. Done thoughtfully, this can meaningfully reduce your tax bill.

To apply losses to the current tax year, trades must settle by December 31. Because most Canadian and U.S. securities settle one business day after the trade date, the last eligible trading day for 2025 is Tuesday, December 30. Still, financial advisors often encourage investors to complete any key trades by mid-December to avoid holiday-season volatility.

But tax-loss selling should never become an annual ritual done simply for the sake of “cleaning house.” Before selling anything, ask: “Is this truly a permanent loser, or is it a temporarily underperforming asset with the potential to recover?”

In many cases, future winners begin as volatile laggards. For patient investors, tax-loss season can also be a chance to accumulate quality names at weakened prices.

When “losers” are actually opportunities: 2 stocks worth a second look

CGI: A tech name facing pressure

CGI (TSX:GIB.A) has had a tough year, dropping roughly 21%. That weakness has pushed the stock toward more attractive valuations relative to its historical norm. The softness was driven largely by restructuring costs — particularly in Continental Europe — as well as slower organic growth and heavier debt loads from acquisitions.

Yet the company’s fiscal 2025 results paint a more nuanced picture:

• Revenue climbed 8.4% to $15.9 billion.
• Net earnings slipped 2% to $1.7 billion, while diluted EPS inched up 0.5% to $7.35.
• Adjusted net earnings rose 6% to $1.9 billion and adjusted EPS surged 8.9% to $8.30.
• The company ended the year with a substantial $31.45-billion backlog.

At roughly $124 per share at writing, the analyst consensus target implies a discount of about 20%, translating to potential near-term upside of more than 24%. 

Management expects meaningful margin recovery in late 2026 or 2027, supported by AI-driven managed services — a runway that suggests patient investors should think in terms of a multi-year horizon rather than a quick trade.

Waste Connections: A rare dip for a long-term compounder

Another interesting case is Waste Connections (TSX:WCN), down about 6% year-to-date — a notable decline for a stock that has been a long-term winner. 

Over the past decade, the company has been more than a 12-bagger, delivering annualized returns close to 29%.

Its business model is simple and essential: providing garbage and recycling services, managing landfills, handling specialized waste streams, and keeping communities functioning smoothly. Here are some highlights in the first nine months of the year:

• Revenue rose 6.5% to US$7.1 billion.
• Operating income grew 1.8% to US$1.3 billion.
• Net income ticked up 0.7% to US$818 million.
• Diluted EPS improved 0.3% to US$3.16.

In October, the company raised its dividend by 11.1%, a clear signal of management’s confidence.

At about $232 per share at writing, the analyst consensus target indicates a discount of 13% and a potential 15% upside. For long-term investors, this pullback could be an opportunity to ease into a high-quality compounder.

Investor takeaway: Review, don’t react

As December progresses, additional tax-loss pressure can create short-term volatility, especially in stocks already underperforming this year. 

Instead of reacting impulsively, investors should take the time to review their portfolios carefully. Determine whether tax-loss selling makes sense for your situation — and assess which weakened stocks may actually deserve a spot in your long-term strategy. 

Sometimes, the best opportunities come wrapped in a short-term loss.

The post Have a Few Duds? How to Be Smart About Investment Losses (Tax-Loss Strategies for Canadians) appeared first on The Motley Fool Canada.

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More reading

• Ready to Max Out Your TFSA? 2 Canadian Blue-Chip Stocks Offer Huge Growth
• TFSA: The Perfect Canadian Stocks to Buy and Hold Forever
• TFSA: 3 Canadian Stocks to Buy and Hold Forever
• Got $500? 5 Top Canadian Stocks to Buy and Hold
• Top Canadian AI Stocks to Watch in 2026

Fool contributor Kay Ng has no position in any of the stocks mentioned. The Motley Fool recommends CGI. The Motley Fool has a disclosure policy.