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:
(NYSE:CAH) Cardinal Health
(NYSE:CTL) Century Telephone
(NYSE:GE) General Electric
(NYSE:IFF) International Flavors and Fragrances
(NYSE:IP) International Paper
(JAVA) Sun Microsystems
(NASDAQ:JDSU) JDS Uniphase
(NYSE:S) Sprint Nextel
(NYSE:SEE) Sealed Air
(NYSE:STZ) Constellation Brands
(NYSE:TE) Teco Energy
(WFMI) Whole Foods
Mid-Cap Reversal Candidates:
(NASDAQ:CAKE) Cheesecake Factory
(NASDAQ:CHRS) Charming Shoppes
(NYSE:MDU) MSU Resources
(NYSE:PKG) Packaging Company of North America
(NYSE:PL) Protective Life
(NYSE:RPM) RPM International
(NYSE:SPW) SPX Corpp.
(NASDAQ:TECD) Tech Data
(NYSE:TRN) Trinity Industries
Small-Cap Reversal Candidates:
(NYSE:AIN) Albany International
(NYSE:BMR) BioMed Realty Trust
(NYSE:COO) Cooper Cos.
(NYSE:CV) Central Vermont Public Service
(NYSE:ETH) Ethan Allen
(GFG) Guarantee Financial Group
(IFC) Irwin Financial
(NYSE:ITG) Investment Technology
(NYSE:JBT) John Bean Technologies
(NYSE:NPO) EnPro Industries
(NYSE:RTEC) Rudolph Technologies
(NYSE:SSP) E.W. Scripps
(NASDAQ:TTWO) Take-Two Interactive
The excellent research department of Credit Suisse First Boston has produced superb institutional investor work on this theme for several years.