Friday, December 22, 2006
Fund Managers: Year End Window Dressing, Buy The Winners, Sell The Losers
XMSR and SIRI are down big this year, so it will be difficult to convince managers to show them as holdings through Dec. 31. Hopefully, January will be a turning point.
Street Sleuth,The Wall Street JournalManagers Dress Up Portfolios for Year End
Attempt to Emphasize Winners Pushes Top Performers Higher; 'It's Like Watching 'The O.C.' '
By GREGORY ZUCKERMAN and KAREN RICHARDSON, December 22, 2006; Page C1
It's that time of year again. Money managers finish their holiday shopping, pack for the family vacation -- and jump into the quarterly ritual of furiously dressing up their investment portfolios to make them look as good as possible to investors.
When firms send out their investor reports after each quarter, they usually list their top holdings, to provide a sense of what stocks they own.
To make it look like they picked lots of winners, it appears many money managers, from mutual funds to hedge funds, spend this time of year selling off picks that performed poorly in the previous 11 weeks or so and buying up the quarter's best performers. Some also buy even more shares of their biggest winners, which can drive the price to boost returns, at least temporarily.
"I've never heard anybody tell me they do it, but it's like watching 'The OC,' " says Thomas Russo, portfolio manager at Gardner Russo & Gardner, an investment adviser in Lancaster, Pa. "Nobody admits they watch [the Fox television show] and say they're watching PBS instead. But the ratings show something different."
Mr. Russo insists he doesn't engage in window dressing, as the practice is known.
How successful is this window dressing?
In the past 16 years, the Standard & Poor's 500-stock index's best-performing stocks of the first 11 weeks or so of the fourth quarter trounced the overall index by an average 2.6 percentage points in that final week, according to a research report by Thomson Financial. The stocks have beaten the market in each of those 16 years...read more: here
12/22/2006 07:44:00 AM
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