Insider Monkey
11 Oversold Value Stocks To Buy Now
Ramish Cheema
9 min read

In This Article:

In this piece, we will take a look at the 11 oversold value stocks to buy now. If you want to skip our overview of what defines an oversold stock and the basics of value investing, then you can take a look at the 5 Oversold Value Stocks To Buy Now.

Analyzing stocks in 2024 is quite different from analyzing them a couple of decades back. In fact, even as early as the early 1990s, traders had significantly lesser amounts of data at their disposal for their trading strategies, as they operated in an era that came to be defined by the rise of quantitative trading through pioneers such as D.E. Shaw of the D. E. Shaw Group and patient value investors like Seth Klarman of Baupost Group and Warren Buffett of Berkshire Hathaway.

While quantitative trading is characterized by its data heavy approach that sees hedge funds rely on voluminous amounts of data to make their bets, it's not the only strategy that uses data. Another data intensive approach is called technical trading, and it can be considered a rather distant cousin of quantitative trading. This is because both these strategies rely on statistical concepts such as averages and correlation. However, technical trading relies more on underlying stock movements, and it concerns itself with metrics such as moving averages for share prices, the correlation between share prices and broader stock indexes, the pace of share price movement over a unit time period, and whether a stock is seeing higher buying or selling interest compared to historical data.

Measuring the buying or selling interest is officially dubbed as checking whether a stock is overbought or oversold. It is measured through an indicator called the relative strength index (RSI), which is simply a complex ratio of share price gains and losses over a fixed time period. The RSI indicator lets investors potentially determine whether a stock is undersold or oversold and helps them position their portfolios accordingly. An RSI score greater than 70 shows that a stock might be overbought while a reading below 30 shows that it might be oversold. While an RSI reading can indicate an oversold stock that might be ripe for buying, it can also be combined with other indicators.

Two such approaches, particularly when evaluating oversold stocks (and oversold value stocks as well), involve the share price and share price moving averages. For the share price, if it is falling and setting new lows while the RSI reading is rising or setting higher new lows, then the price can be construed to potentially rise in the future based on these technical indicators alone. Similarly, a rising RSI coupled with a rising price that crosses moving averages is also used by some to start buying.

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