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Window Dressing: Which Stocks May Be Oversold Or Overbought?

The end of the third quarter on Wednesday may spark volatility as fund managers engage in what is known as "window dressing".

You might remember that Danielle Hughes of Divine Capital first suggested window dressing as a market influence on Fast Money’s Sept. 9th Halftime Report.

If you’re not familiar with window dressing, it’s a strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders, according to Investopedia.

In a nutshell money managers sell laggards in favor of outperformers to spruce up portfolios and make it look like their holding a lot of winners. Although that doesn’t increase profits, it makes your quarterly statement more appealing.

Following is a list of stocks that Steve Grasso suggests may be oversold or overbought as a result of window dressing.

QUARTER-END CLEAN UP: WHAT THEY'RE BUYING:
GRASSO'S PICKS

Quarter-To-Date
GE +43%
Apple +31%
Goldman Sachs +22%


QUARTER-END CLEAN UP: WHAT THEY'RE SELLING:
GRASSO'S PICKS

Quarter-To-Date
IBM +16%
Exxon FLAT
Potash -1%


What's the trade?

I think the one mistake on this list is Exxon , muses Joe Terranova. As far as I'm concerned they have the best balance sheet in the world. And if you think the demand for energy will increase long-term, I'd be a buyer of this dip.

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Trader disclosure: On Sept. 28th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Terranova Owns (F), (KCE), (SUN), ABT); Terranova Is Short (CCL), (ESS); Terranova Works For (VRTS); Grasso Owns (AAPL), (ABK), (BAC), (C), (COST), (CSCO), (PFE), (V), (WMT); J. Najarian Owns (AAPL), (ACI), (BAC), (BX), (GHL), (GS), (SF), (TTWO),, (WFC), (MU), (PXP); J. Najarian Is Short (V); J. Najarian Owns (RIMM) & (RIMM) Calls

For Steve Grasso
Stuart Frankel Owns (ACS)
Stuart Frankel Owns (GERN)
Stuart Frankel Owns (HSPO)
Stuart Frankel Owns (MSFT)
Stuart Frankel Owns (NWS.a)
Stuart Frankel Owns (NYX)
Stuart Frankel Owns (PFE)
Stuart Frankel Owns (PDE)
Stuart Frankel Owns (ROK)
Stuart Frankel Owns (XOM)
Stuart Frankel Owns (PFE)
Stuart Frankel Owns (SDS)
Stuart Frankel Is Short (QQQQ)

For Dennis Gartman
Gartman Owns Gold In Euros
Gartman Owns 10-Year Bonds
Gartman Owns (AAPL)

For Geoff Porges
A Member of Porges' Household Owns (VRTX)
A Member of Porges' Household Owns (EXEL)
Sanford Bernstein Owns (HGSI)
Sanford Bernstein Owns (GILD)
Sanford Bernstein Owns (AMGN)
Sanford Bernstein Owns (CELG)
Sanford Bernstein Owns (VRTX)
Sanford Bernstein Makes A Market In (HGSI)
Sanford Bernstein Makes A Market In (GILD)
Sanford Bernstein Makes A Market In (GENZ)
Sanford Bernstein Makes A Market In (BIIB)
Sanford Bernstein Makes A Market In (AMGN)
Sanford Bernstein Makes A Market In (CELG)
Sanford Bernstein Makes A Market In (VRTX)

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