I am retired and take educated guesses on all things financial.

November 05, 2008

November 5, 2008: Clean Up When Funds Clear Out

Money managers clean up portfolio holdings before the end of their tax year. Over 48%of US mutual funds close their books between late October and December. Managers sell stocks with large losses to avoid reporting them on their year-end report to shareholders. This causes downward pressure on stocks trading within their portfolio(s)that are at or near 52-week lows. Once the selling subsides, these stocks have historically experienced a price reversal. That said, investors should exercise due diligence before buying any of the companies listed below by analyzing any potential shift in a company's fundamentals and other factors such as sector weight and risk tolerance.

Here are the screen parameters used to select the following "sells" from funds:

Large-cap and mid-cap stocks trading at or below 30% of their 52-week high and have not bounced above 15% from their 52-week low,and have above-average valuation on both an absolute and relative basis.

Small-cap stocks trading at or below 40% of their 52-week high and have not bounced above 10% from their 52-week low, and have above-average valuation on both an absolute and relative basis.

Here are the stocks as of November 4th that met the screen:

Large-Cap Reversal Candidates:

ABC AmerisourceBergen
AET Aetna
AIZ Assurant
CAH Cardinal Health
CTL Century Telephone
EQ Enbarq
EXPE Expedia
GE General Electric
GLW Corning
IFF International Flavors and Fragrances
IP International Paper
JAVA Sun Microsystems
JDSU JDS Uniphase
LXK Lexmark
MCK McKesson
MOLX Molex
S Sprint Nextel
SEE Sealed Air
STZ Constellation Brands
SWY Safeway
SYMC Symantec
TAP Molson
TE Teco Energy
WFMI Whole Foods
WYE Wyeth

Mid-Cap Reversal Candidates:

ACXM Acxiom
AFFX Affymetrix
ANN AnnTaylor
BLC Belo
CAKE Cheesecake Factory
CHRS Charming Shoppes
CTV CommScope
IMN Imation
LEA Lear
MDU MSU Resources
PKG Packaging Company of North America
PL Protective Life
RGS Regis
RPM RPM International
SPW SPX Corpp.
TECD Tech Data
TRN Trinity Industries
UVV Universal
WSM Williams-Sonoma

Small-Cap Reversal Candidates:

AIN Albany International
BMR BioMed Realty Trust
COO Cooper Cos.
CV Central Vermont Public Service
ETH Ethan Allen
GFG Guarantee Financial Group
IFC Irwin Financial
ITG Investment Technology
JBT John Bean Technologies
NPO EnPro Industries
RTEC Rudolph Technologies
SSP E.W. Scripps
TTWO Take-Two Interactive

The excellent research department of Credit Suisse First Boston has produced excellent institutional investor work on this theme for several years.

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