Ned Davis Research — one of the few investment companies that called for clients to move away from stocks well before the recent crash — is now calling for clients to shift more money back into equities, the Los Angeles Times’ Tom Petruno writes.

Davis, which had cut its recommended portfolio stock weighting from 55% to 50% in July 2007 and down to 40% in January 2008, is now recommending clients reweight their portfolios so they are 55% in stocks, according to Petruno. Davis cut its recommended bond allocation to 35% (down from 40%), and its cash recommendation to 10% (down from 20%).

Tim Hayes, Davis’ chief investment strategist, told clients that the market is “following the script for a bottoming process,” Petruno says, adding that Hayes mentioned a number of technical signs that support that contention (including that recent sell-offs have been occurring on diminishing share volume, suggesting that selling pressure has been letting up). Hayes also said that hedge funds and other big investors are holding on to high levels of cash, and because of that we could see a big upward move if upside momentum really kicks in. Hayes also cited low yields on Treasuries and expectations for a huge federal spending program as reasons stocks could outperform bonds.