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If you are looking for possible short candidates, you might want to investigate Merrill Lynch’s (MER) list of stocks poised to move lower.

From the report:

“There are two major reasons for the potential pullback. First, the reversal of ‘window dressing.’ That is, investment managers may hold stocks with the biggest gains until year-end year to indicate that the fund participated in the biggest winners of the year. Second, investment managers may wait until January to exit best performing stocks to avoid short-term capital gains.”

Here are the stocks that make up the list and the price when the call was made:


The list above reflects the personal views of Savita Subramanian from Merrill Lynch.

Merrill Lynch Methodology

Our understanding of Merrill Lynch methodology was to screen stocks in the S&P 1500 by the following criteria:

  • Outperformance in 2006: performed at least twice as well as its respective
  • S&P 1500 sector between 12/31/2005 and 12/18/2006.
  • Fundamental Outlook: NEUTRAL or SELL rated by Merrill Lynch
  • Fundamental Research, where ML fundamental analyst’s outlook does not appear to offset a potential seasonal sell-off.

  • Disclosure: Author has no position in the above-mentioned stocks.

    Source: Merrill Lynch's Short List