Mutual Fund Year-End Window Dressing Meets FOMC Date (MSFT, CSCO, GOOG, AAPL, RIMM, VMW, EMC, KO, YUM, MCD, BIDU, CROX, DELL, SCI, GS, STT, NYX, TXT)

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Wednesday is much more than Halloween and it is more than the FOMC announcement date.  We have an event that has been perhaps more influential to many key stocks than the upcoming announcement on Wednesday out of the FOMC.  The key event is that it coincides with being the fiscal year-end for most mutual funds out there.  There are many stocks that were prior beneficiaries of WINDOW DRESSING at the end of September, but this list may be far more important as the year-end names will appear in annual reports for mutual funds.  Oddly enough, these might not see the same love as the last quarter (see below).


24/7 Wall St. recently showed "a quarter-end statement" list of stocksthat would have been a beneficiary of traditional quarter-end windowsdressing.  If you thought that a quarter was an important time forWindow Dressing, October 31 is a much more critical date as it marksthe fiscal year-end for most mutual funds.  So these stocks that areheld at that time are what will appear in the annual report for everyfund.

But there is a new list as many of these cycle out, particularly afterearnings. Now that earnings have come out on many and now that manysectors have made there moves, the list would be quite different thanthe prior list.  We didn’t show the returns on these since the end ofthe prior quarter and since the end of last month.  If you follow themarket very much uyou’ll know these are all either on year-highs or atleast have been solid stocks for more than just the last month.

Old Window Dressing names still likely on the list:

  • Cisco Systems (CSCO), Google (GOOG), Apple (AAPL), Research inMotion (RIMM), VMware (VMW), (BIDU), & Crox (CROX). 

New likely candidates for Window dressing, even though some of theseshould have been mentioned last time around and were left off:

  • Microsoft (MSFT), EMC (EMC), Dell (DELL), Coca-Cola (KO), Yum! Brands (YUM), McDonald’s (MCD)….
  • Intuitive Surgical (ISRG) should have made the list before, butyou know it’s one of the year-end windows dressing beneficiaries.
  • Goldman Sachs (GS) or State Street (STT) would be in the fewfinancials after recent woes, and it’s possible that NYSE Euronext(NYX) would make the list after being added to the S&P 500 Indexand after a monster run.
  • Textron (TXT)would likely qualify as well.
  • Service Corp. (SCI) has had a great quarter, but it’s year has been the best in any memory at all.

Likely booted off the list:

  • Oddly enough, a true chartist might say that the oil and gasstocks that were a definite winner of window dressing in the calendarQ3 would not be in the windows dressing names.  Those go-to names wouldbe the likes of ExxonMobil (XOM), Schlumberger (SLB), and NationalOilwell Varco (NOV). Goldman Sachs oil call is adding pressure to thelist today, although it is hard to imagine even if oil saw anothermulti-day pullback that there would be a major panic selling in thestocks (although, that axe may have a very broad swing in bothdirections after the monster move we’ve witnessed there). There sureappears to be a sector rotation out of energy and into tech.
  • (AMZN) may also be off the list since it pulledback on earnings, and if energy is pulling back then it’s likely thatFirst Solar (FSLR) would be off the old list since it is alternativeenergy and leveraged to oil prices in theory.

There is one key difference between the last round of window dressingand this round of window dressing.  It is quite possible that some ofthe funds won’t have to hold these again (or at least with as muchvigor nor with as much allocation) for a while until the next round ofwindow dressing.  The next window dressing surge doesn’t come until thecalendar year-end when independent money managers and other financialand fiduciary institutions have to embark upon their version of corewindows dressing. That leaves another 60 days before any criticaldecisions need to be made.

Obviously there were many other names that could be on this list, and no disrespect  nor neglect was meant to those stocks.

Jon C. Ogg
October 30, 2007

Jon Ogg can be reached at; he produces the Special Situation Investing Newsletter covering buyout candidates, spin-offs, restructurings, and more.  He does not own securities in the companies he covers.  Join our free email list here that previews some of the special situations and other key developments in M&A, regulation, market discrepancies, media coverage, and more.