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Pulling the Curtain Back on Window Dressing


With October 31 marking the end of many mutual funds' fiscal years, expect to see some significant market action leading up to that date.

For instance, selling typically puts downward pressure on stocks; once the adjustment season is over, the stocks sold historically reverse course. Therefore, an investor could screen stocks and make very educated guesses on which stocks are likely to be on fund managers' radars.

For the sake of argument, I set up a Google stock screen to show stocks by price/earning (P/E) ratio, 52-week price change, to see if I could identify stocks that might see increased selling or buying volume next week. I disregarded ADRs.

The screen quickly brought up Marvell Technology Group (NASDAQ:MRVL). With a market cap of $4.12 billion, Marvell has a low P/E ratio (9.47) relative to its peers, shows a negative 52-week price change of 43.20%, and is currently trading within pennies of its 52-week low ($7.36). Voilà -- a candidate for selling. In the mid-cap range, Diamond Foods (NASDAQ:DMND) showed a low P/E (8.20) relative to its peers, showed a negative 73.85% price change over the past 52-weeks, and is currently trading at a price ($18.23) some 12% above its 52-week low. (I used 15% bounce back as my cut off.)

Flipping my screen around, I see that $3.4 billion market cap Six Flags (NYSE:SIX) has a P/E ratio (89.27) higher than most peers, has shown a 52-week price change of +120%, and is currently trading 113% higher than its 52-week low. Perfect candidate to buy. American Vanguard (NYSE:AVD), with a market cap of $224.33 million, boasted a 34.37 P/E ratio, which is higher than most (but not all) peers. American Vanguard has made a 239.30% price change in the past 52 weeks and is trading at $23.80, which is 233% over its 52-week low . Genius.

We will follow up to see what really moves next week.
No positions in stocks mentioned.
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