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:

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

Mid-Cap Reversal Candidates:

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

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
(NYSE:GFG) Guarantee Financial Group
(NYSE:IFC) Irwin Financial
(NYSE:ITG) Investment Technology
(NYSE:JBT) John Bean Technologies
(NYSE:NPO) EnPro Industries
(NASDAQ:RTEC) Rudolph Technologies
(NYSE:SSP) E.W. Scripps
(NASDAQ: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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