Looking for rebound candidates within the technology sector? Using the technical indicator RSI(14) and EPS trends we created a list that could be a useful starting point for your search.
While investors' eyes seem glued to Apple (AAPL) and Groupon's (GRPN) recent rally andcaught up in the Samsung IV release, the rest of the technology industry trailed the S&P 500 last week. The sector dropped 0.22% on Monday.
With this in mind we created the list below by starting with a universe of technology stocks that are technically oversold (with RSI(14) below 40). We screened out market caps under $300 million to avoid the smaller players. About 67 stocks met the criteria.
Could this overselling be the result of an industry trend rather than a stock specific consideration? To find names that may have been "unfairly" oversold, we look a look at EPS trends.
Based on the theoretical assumption that if P/E is equal to a constant K, growth in EPS estimates should be matched by proportionate growth in price. When they don't match up, a mispricing may have occurred. We screened for those exhibiting this mismatch between changes in EPS estimate and price.
We were left with 4 names.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Do you think these stocks have been unfairly sold off? Do you think they might be ready for a rebound? Use this as a starting point for your own analysis.
1. AOL, Inc. (AOL): Operates as a Web services company that offers a suite of brands and offerings for the worldwide audience.
- Market cap at $2.67B, most recent closing price at $34.60.
- RSI(14) at 39.41.
- The EPS estimate for the company's current year increased from 1.44 to 1.52 over the last 30 days, an increase of 5.56%. This increase came during a time when the stock price changed by -12.45% (from 39.52 to 34.6 over the last 30 days).
- AOL is a hotly debated stock. Even while EPS estimates go up there is no consensus among traders. Hedge funds are currently selling the stock at significant levels: Net institutional sales in the current quarter at -8.4M shares, which represents about 11.6% of the company's float of 72.39M shares.
- Meanwhile, short sellers are signaling optimism by covering their positions: Shares shorted have decreased from 12.31M to 10.14M over the last month, a decrease which represents about 3.% of the company's float. Days to cover ratio at 6.74 days.
2. Equinix, Inc. (EQIX): Provides data center services for the protection and connection of information assets to enterprises, content providers, financial companies, network service providers, and cloud and IT services companies.
- Market cap at $10.26B, most recent closing price at $210.17.
- RSI(14) at 35.95.
- The EPS estimate for the company's current year increased from 3.27 to 3.69 over the last 30 days, an increase of 12.84%. This increase came during a time when the stock price changed by -6.4% (from 224.53 to 210.17 over the last 30 days).
- Hedge Funds seem more optimistic: Net institutional purchases in the current quarter at 3.4M shares, which represents about 8.22% of the company's float of 41.37M shares.
- In recent news, Equinix announced on Friday that to meet the rising need for data, they have opened the second International Business Exchange (IBX) data center, SE3, in downtown Seattle next to their SE2 data center. Shares dropped 2.27% by Monday's close.
3. Tangoe, Inc. (TNGO): Provides on-demand communications lifecycle management (CLM) software and related services to enterprises, including large and medium-sized businesses and other organizations.
- Market cap at $471.23M, most recent closing price at $12.44.
- RSI(14) at 33.09.
- The EPS estimate for the company's current year increased from 0.64 to 0.69 over the last 30 days, an increase of 7.81%. This increase came during a time when the stock price changed by -18.% (from 15.17 to 12.44 over the last 30 days).
- Shares shorted have increased from 5.29M to 5.65M over the last month, an increase which represents about 1.1% of the company's float of 32.78M shares. Days to cover ratio at 11.86 days.
- Short sellers have been rewarded for their pessimism. The stock's average daily alpha vs. the S&P500 index stands at -1.16% (measured close to close, over the last month). During this period, the longest losing streak lasted 7 days (i.e. the stock's daily returns underperformed the S&P 500 for 7 consecutive days). The longest winning streak lasted 2 days (i.e. a win streak / losing streak ratio of 0.29).
- In recent news, a class action lawsuit has "been commenced in the United States District Court for the District of Connecticut on behalf of investors who purchased Tangoe, Inc. ("Tangoe" or the "Company") stock between December 20, 2011 and September 5, 2012 (the "Class Period")."
4. VimpelCom Ltd. (VIP): Operates as an integrated telecommunications services provider, offering voice and data services through a range of wireless, fixed, and broadband technologies.
- Market cap at $15.33B, most recent closing price at $11.77.
- RSI(14) at 38.43.
- The EPS estimate for the company's current year increased from 1.2 to 1.27 over the last 30 days, an increase of 5.83%. This increase came during a time when the stock price changed by -4.07% (from 12.27 to 11.77 over the last 30 days).
- According to Seeking Alpha contributor Ben Kramer-Miller, "For investors who are bullish on commodities and on Russia.. companies such as the major telecommunications service providers VimpelCom Ltd. (VIP) and Mobile TeleSystems OJSC (MBT), as well as Russia's major search engine provider with 60% market share, Yandex (YNDX) (i.e., the Russian Google) should perform very well."
*EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.