It should not be possible to beat the market with either technical or fundamental analysis.

That’s because, in theory, efficient markets incorporate all known information instantaneously in the prices of publicly traded financial instruments.

However, it has been proven time after time that markets aren’t always efficient. Anomalies that disprove the notion of efficient markets exist, and savvy investors can put them to profitable use.

One long-standing market anomaly is the so-called “January effect”: returns are better in January than any other month of the year. It is linked in particular to shares of medium and smaller companies, and it’s explained by so-called tax loss “harvesting” in November and December.

Despite the name, tax-loss harvesting does not refer to an agricultural pursuit. It simply describes a tax management tactic whereby investors sell shares at a loss to offset capital gains made elsewhere in their portfolio.

In Canada, share losses can be offset against capital gains made in the previous three years; they can also be applied against gains on investment properties. Once sold, the shares may not be repurchased within 30 days or the tax authorities may disallow the loss.

The year 2016 has so far been much kinder to investors than was last year, when investors raked up large losses in Canadian stocks — especially those linked to the energy and mining sectors. Tax loss harvesting may be more limited this year, but there may still be some opportunities.

The tax loss selling season typically reaches its peak in November and the first three weeks of December, when strange trading prices sometimes appear, especially for less liquid stocks.

It is therefore helpful for investors in Canadian equities to be aware of the more popular stocks that may be prime targets for tax loss harvesting. Identifying such stocks serves as an early warning indicator of potential price weakness, and it can also create excellent investment opportunities for astute investors.

The accompanying table lists some of the more popular names held by many Canadian and other investors that have declined by 10% or more over the past 12 months or the past six months. These are prime candidates for tax loss harvesting.

Our approach to the tax loss harvesting season is simply to be careful when selling stocks at depressed prices over the next month, or to have clear targets on stocks that may be attractive at give-away prices. Some of the stocks in the table are current holdings in our Dividend Champions portfolio. Based on the assumption that there is no deterioration in the fundamental outlook for these four stocks, we would be buyers if the prices are forced down by aggressive tax loss selling in November and December.