DaytradeTeam Profitzzz
Recaps of DaytradeTeam Trading Systems Performance
Tuesday, August 16, 2005
Window Dressing--End of Quarter Moves
Window dressing is a term that refers to mutual fund or hedge fund managers adjusting their portfolios in the final days of a particular time period--usually a fiscal quarter. Fund managers are usually required to print a listing of all of the stocks held by the fund on a quarterly basis. In order to make their fund look more attractive, managers will often make changes to their portfolio in the final days leading up to the end of the quarter.
See, fund managers need people to think that they know what they are doing (many of them are very good, many are not)--this helps get new investment into the fund and maintain current investors as well. To maximize the appearance of their skill, they will often sell shares of stocks that have performed badly over the previous quarter so that such a "loser" is not on their books. Likewise, they will often buy shares of a stock that has performed exceptionally well so that they can show potential investors that they own the "hot stocks". What is usually hidden is that they actually made these trades AFTER the stock had made its move.
While this may be a problem for fund investors, it provides DaytradeTeam with great opportunities!
During the 2nd quarter of 2003, Shuffle Master, Inc. (Nasdaq: SHFL) had a very impressive uptrend and gained 45% in a run from 20 to 29. This move was made more noticeable by SHFL`s inclusion in Investors Business Daily`s Top 10 stocks several weeks in a row. We thought that this was exactly the type of stock that funds would want to show investors that they own (a high profile rise), but one that most funds probably did not own (not exactly as well known as Intel or Cisco). The stage was set for some fund "window dressing" buying to come into the stock, which we thought could move the price upwards fairly fast (because of the relatively low avg daily volume).
2 weeks prior to the end of the quarter, on June 17, our Classic Swing Trading System bought SHFL at 26.80 average (after a nice pullback thanks to a downgrade) and our Directional Put/Call Options System bought SFQ GE, a July call option at 2.78 average. After a few days of sideways trading the fund buying started to kick in. Volume and price increased steadily day by day and we sold the stock at 28.74 for a gain of 7% and the option at 3.97 for a gain of 43%.
When the middle of March, June, September and December comes around and the end of the quarter draws near, see if you can find any "window dressing" plays through the end of the month. Look for little known stocks over $15 with steady price increase, increased volume and attention in financial publications over the past 3 months. Odds are some fund managers will notice it too and want it in their next listing of holdings!
See, fund managers need people to think that they know what they are doing (many of them are very good, many are not)--this helps get new investment into the fund and maintain current investors as well. To maximize the appearance of their skill, they will often sell shares of stocks that have performed badly over the previous quarter so that such a "loser" is not on their books. Likewise, they will often buy shares of a stock that has performed exceptionally well so that they can show potential investors that they own the "hot stocks". What is usually hidden is that they actually made these trades AFTER the stock had made its move.
While this may be a problem for fund investors, it provides DaytradeTeam with great opportunities!
During the 2nd quarter of 2003, Shuffle Master, Inc. (Nasdaq: SHFL) had a very impressive uptrend and gained 45% in a run from 20 to 29. This move was made more noticeable by SHFL`s inclusion in Investors Business Daily`s Top 10 stocks several weeks in a row. We thought that this was exactly the type of stock that funds would want to show investors that they own (a high profile rise), but one that most funds probably did not own (not exactly as well known as Intel or Cisco). The stage was set for some fund "window dressing" buying to come into the stock, which we thought could move the price upwards fairly fast (because of the relatively low avg daily volume).
2 weeks prior to the end of the quarter, on June 17, our Classic Swing Trading System bought SHFL at 26.80 average (after a nice pullback thanks to a downgrade) and our Directional Put/Call Options System bought SFQ GE, a July call option at 2.78 average. After a few days of sideways trading the fund buying started to kick in. Volume and price increased steadily day by day and we sold the stock at 28.74 for a gain of 7% and the option at 3.97 for a gain of 43%.
When the middle of March, June, September and December comes around and the end of the quarter draws near, see if you can find any "window dressing" plays through the end of the month. Look for little known stocks over $15 with steady price increase, increased volume and attention in financial publications over the past 3 months. Odds are some fund managers will notice it too and want it in their next listing of holdings!
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