In this piece, we will take a look at ten oversold value stocks to buy. If you want to skip an introduction to value investing and oversold stocks, then take a look at 5 Oversold Value Stocks To Buy.
Value investing has multiple benefits, particularly for patient investors. Understanding the complexities of a firm's business operations and translating them into a stock price to compare it with the market price is a tedious process that can provide the right dividends if executed correctly. Theoretically, the field of value investing is now more than a century old. Its fundamentals center on completely ignoring price movements and focusing on intrinsically valuing a stock. This value is then compared to the stock price for determining a margin of safety that the investment would have to overcome to converge with the market price and provide an opportunity to sell the shares and book a profit.
The market's role in value investing is simply of a "voting machine" with little relation to the actual value that a stock provides. When patiently followed, it has the potential to return billions of dollars in profit through share price appreciation - a fact that has contributed to the massive wealth of famous value investors like Warren Buffett.
However, while the fundamentals of value investing were written in 1930, selecting shares through a quantitative metric dubbed the relative strength index (RSI) is a relatively new theory. The RSI, at its heart, is a momentum oscillator that determines the upward and downward variations in stock prices. It has only positive values that are limited to a maximum of 100 and is often used as part of a technical trading setup which indicates whether a stock is oversold or undersold. Determining whether an RSI reading alone is sufficient to determine if a stock can be bought or sold is the same as using a mean profit of a corporation to determine financial strength without comparing it to peer values.
Reading the index requires understanding its moves, their magnitude, and the frequency of overbought or oversold readings. The frequency of these readings and the levels that they trade at provides details about whether a stock is a bull or a bear run. Crucially, RSI readings and stock prices can also diverge. For instance, a share might have an RSI reading in overbought territory (namely around the 80 level) but, while intuition suggests that an overbought territory should yield a downward price correction, the opposite happens and the shares actually start to rise in value. In this case, conventional wisdom suggests that a price reversal might be in place and lead to a longer downturn.
A bearish signal provided by the RSI is dubbed by its founder as a Failure Swing where the RSI fails to meet previous high readings. This failure of the reading to, for instance, touch 75 but then drop and touch only 73 before dropping again can indicate a potential downturn in the market. The opposite of this can be a bullish indicator, where the RSI crosses the previous high, for example, touches 20 and then crosses 20.
However, while technical indicators can be a nice way of studying individual stocks or other instruments such as currencies, the market as a whole is often influenced by macroeconomic patterns. And in the American economy, banks have decided to change their recession forecasts. This trend was started by Bank of America in its latest U.S. Economic Viewpoint report which expects U.S. economic growth to fall below previous levels but still remain positive. BofA was joined by JPMorgan who also no longer believes that the U.S. economy might be headed for a downturn. In a fresh research note issued late in the trading day on Wednesday, the bank's chief economist Michael Feroli revised its earlier GDP growth forecast for Q2 2023 to 2.5% from a dismal 0.5% earlier. His shift in viewpoint is influenced by the strong GDP growth rate in the second quarter, which has led the team at the investment bank to doubt that growth can drop from 2.5% to 0.5% within a quarter.
The latest jobs report did not favor any aggressive monetary tightening, and if the inflation readings also indicate that prices continue to drop then the Fed might actually start becoming cautious of rethinking a potential 'higher for longer' approach. However, on the flip side, as the GDP growth continues to be robust, as evidenced by analyst thoughts above, then the central bank might also see more leeway in finding the upper range of its interest hiking cycle.
To understand the impact of the latter thought process consider the fact that after JPMorgan revised its recession estimates, the S&P500 dropped from 4,540 points it was trading at during midday to close at 4,478. Seems like Wall Street is also wary of higher interest rates fueled by an optimistic Fed.
With these details in mind, let's take a look at some oversold value stocks. The top scorers are Assertio Holdings, Inc. (NASDAQ:ASRT), Cambium Networks Corporation (NASDAQ:CMBM), and First Wave BioPharma, Inc. (NASDAQ:FWBI).
Oversold Value Stocks To Buy
Photo by Chris Liverani on Unsplash
Our Methodology
For this article we chose 10 companies with the lowest RSI scores, a price to trailing earnings ratio (P/E) of less than 15, and average analyst ratings of Buy or higher.
TELUS International (Cda) Inc. (NYSE:TIXT) is a Canadian technology company that provides a variety of products for customer management. These include solutions powered by artificial intelligence, bots, and data analytics. The firm came out with some good news for investors in August after it met its Q2 2023 guidance and confirmed a raised guidance for the full year. TELUS International (Cda) Inc. (NYSE:TIXT)'s shares were awarded accordingly and were up by more than 3%.
By the end of March 2023, five of the 943 hedge funds polled by Insider Monkey had held TELUS International (Cda) Inc. (NYSE:TIXT)'s shares.
Along with Cambium Networks Corporation (NASDAQ:CMBM), Assertio Holdings, Inc. (NASDAQ:ASRT), and First Wave BioPharma, Inc. (NASDAQ:FWBI), TELUS International (Cda) Inc. (NYSE:TIXT) is a value stock that is currently oversold.
Silicom Ltd. (NASDAQ:SILC) is an Israeli company that manufactures and sells networking products such as cards and adapters. The firm managed to meet analyst EPS estimates for its second quarter earnings at a time when the technology industry is reeling back from reduced data center and associated infrastructure spending. After the earnings, Needham rated the shares as a Buy and the stock's average share price target is $35 for an $8 upside.
As of Q1 2023, nine of the 943 hedge funds part of Insider Monkey's database had bought Silicom Ltd. (NASDAQ:SILC)'s shares. The firm's largest investor out of these is Austin Wiggins Hopper's AWH Capital with an investment worth $4 million.
Aptevo Therapeutics Inc. (NASDAQ:APVO) is a biotechnology company that develops treatments for leukemia and other kinds of cancers. The firm successfully closed a $5 million public offering of its shares in August 2023 and the stock is down a massive 74% year to date with little analyst coverage as of late.
After digging through 943 hedge funds for their first quarter of 2023 investments, Insider Monkey discovered that two had held a stake in the company. Aptevo Therapeutics Inc. (NASDAQ:APVO)'s largest shareholder in our database is Ryan Tolkin (Cio)'s Schonfeld Strategic Advisors with a stake of $292,633.
CarGurus, Inc. (NASDAQ:CARG) is a technology company that provides a retailing platform that allows used car sellers to connect with buyers online. The stock tumbled by more than three percent in August after the firm surprised investors by delaying its earnings release for the second quarter. Analyst coverage on the stock is limited as well, as the shares are rated Buy on average but have seen recent Neutral ratings as well.
Insider Monkey's March quarter of 2023 survey of 943 hedge funds revealed that 22 had invested in CarGurus, Inc. (NASDAQ:CARG). Michael Pausic's Foxhaven Asset Management is the firm's largest hedge fund investor since it owns 4.7 million shares that are worth $88 million.
AMN Healthcare Services, Inc. (NYSE:AMN) is a human resources firm that offers hospitals and other facilities with staffing to fulfill the demand of nurses, therapists, physicians, technicians, and others. The firm has outperformed analyst EPS estimates in all four of its latest quarter, making it unsurprising that the stock is rated Strong Buy on average.
By the end of this year's first quarter, 31 of the 943 hedge funds surveyed by Insider Monkey had held a stake in the firm. AMN Healthcare Services, Inc. (NYSE:AMN)'s largest shareholder in our database is Jim Simons' Renaissance Technologies with a $39.8 million stake.
Assertio Holdings, Inc. (NASDAQ:ASRT), AMN Healthcare Services, Inc. (NYSE:AMN), Cambium Networks Corporation (NASDAQ:CMBM), and First Wave BioPharma, Inc. (NASDAQ:FWBI) are some top oversold value stocks.
