Backtesting 12 Low-Debt, Oversold Stocks

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 |  Includes: CALM, CAST, CCM, CVS, ELP, LNCE, NJR, OLN, REXX, SWM, TAP, TGS
by: Kapitall

The following is a list of oversold stocks, as defined by the Relative Strength, or RSI(14), indicator. All of the stocks mentioned below have RSI(14) values below 40, which usually signal oversold conditions.

In addition, all of these stocks have low levels of debt relative to their competitors. This might reduce the near-term risk of investing in some of these oversold names. What do you think?

To understand the significance of the RSI(14) indicator, we also backtested a simple trading strategy to see how these stocks have previously reacted to these trading levels. The strategy is discussed below. (You can access the complete backtested results by clicking here)

Debt data sourced from Fidelity, RSI(14) data sourced from Finviz, and backtesting performed with StrategyDesk.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.



Backtested Strategy: Buy 100 shares of the stock when the RSI(14) indicator drops below 30, and sell when the RSI(14) indicator rises above 50. No trailing stops. (Note: Not all stocks mentioned below have seen the RSI(14) indicator move below 30. The test is done only to demonstrate the past profitability of trading these stocks near current levels).

As always, please note that past performance is no guarantee of future results.

1. Cal-Maine Foods, Inc. (NASDAQ:CALM): Farm Products Industry. Market cap of $676.86M. RSI(14) at 39.11.

TTM Long Term Debt/Equity 27.25% vs. industry average at 74.49%. TTM Total Debt/Assets 20.16% vs. industry average at 33.11%. TTM Total Debt/Equity 33.75% vs. industry average at 91.04%. Current ratio at 2.84 vs. industry average at 1.67. Short float at 26.53%, which implies a short ratio of 30.59 days. The stock has lost -10.19% over the last year.

Backtested Results For CALM: Over the last 5 years, the RSI(14) alert was triggered 6 times. Trading the above-mentioned strategy resulted in 5 winners and 1 loser (83.33% success rate). The strategy returned 44.62%, lower than the buy and hold return of 307.91%.

2. ChinaCast Education Corporation (OTCPK:CAST): Education & Training Services Industry. Market cap of $336.02M. RSI(14) at 31.97.

TTM Long Term Debt/Equity 8.59% vs. industry average at 33.34%. TTM Total Debt/Assets 10.59% vs. industry average at 22.45%. TTM Total Debt/Equity 16.3% vs. industry average at 37.99%. Current ratio at 1.72 vs. industry average at 1.67. Short float at 2.39%, which implies a short ratio of 2.37 days. The stock has lost -10.48% over the last year.

Backtested Results For CAST: Over the last 5 years, the RSI(14) alert was triggered 2 times. Trading the above-mentioned strategy resulted in 1 winner and 1 loser (50% success rate). The strategy returned -26.95%, lower than the buy and hold return of -19.29%.

3. Concord Medical Services Holdings Limited (NYSE:CCM): Hospitals Industry. Market cap of $325.37M. RSI(14) at 23.88.

TTM Long Term Debt/Equity 4.25% vs. industry average at 61.92%. TTM Total Debt/Assets 6.67% vs. industry average at 24.29%. TTM Total Debt/Equity 7.71% vs. industry average at 69.98%. Current ratio at 6.07 vs. industry average at 1.44. Short float at 0.05%, which implies a short ratio of 0.38 days. The stock has lost -25.7% over the last year.

Backtested Results For CCM: Over the last 5 years, the RSI(14) alert was triggered 1 time. Trading the above-mentioned strategy resulted in 1 winner and 0 losers (100% success rate). The strategy returned 7.29%, higher than the buy and hold return of -32.95%.

4. CVS Caremark Corporation (NYSE:CVS):
Drug Stores Industry. Market cap of $44.88B. RSI(14) at 37.38.

TTM Long Term Debt/Equity 24.13% vs. industry average at 44.48%. TTM Total Debt/Assets 18.05% vs. industry average at 20.78%. TTM Total Debt/Equity 30.52% vs. industry average at 52.91%. Current ratio at 1.49 vs. industry average at 1.13. Short float at 0.89%, which implies a short ratio of 1.21 days. The stock has gained 1.29% over the last year.

Backtested Results For CVS: Over the last 5 years, the RSI(14) alert was triggered 8 times. Trading the above-mentioned strategy resulted in 7 winners and 1 loser (87.5% success rate). The strategy returned 48.05%, higher than the buy and hold return of 21.78%.

5. Companhia Paranaense de Energia (NYSE:ELP): Electric Utilities Industry. Market cap of $6.62B. RSI(14) at 32.48.

TTM Long Term Debt/Equity 15.25% vs. industry average at 109.35%. TTM Total Debt/Assets 11.68% vs. industry average at 32.92%. TTM Total Debt/Equity 18.06% vs. industry average at 125.92%. Current ratio at 1.98 vs. industry average at 1.18. Short float at 0.66%, which implies a short ratio of 2.1 days. The stock has gained 13.1% over the last year.

Backtested Results For ELP:
Over the last 5 years, the RSI(14) alert was triggered 4 times. Trading the above-mentioned strategy resulted in 3 winners and 1 loser (75% success rate). The strategy returned 11.58%, lower than the buy and hold return of 172.39%.

6. Lance, Inc. (NASDAQ:LNCE): Processed & Packaged Goods Industry. Market cap of $645.83M. RSI(14) at 27.61.

TTM Long Term Debt/Equity 41.77% vs. industry average at 74.49%. TTM Total Debt/Assets 21.69% vs. industry average at 33.11%. TTM Total Debt/Equity 41.77% vs. industry average at 91.04%. Current ratio at 2.01 vs. industry average at 1.67. Short float at 1.58%, which implies a short ratio of 4.99 days. The stock has lost -5.38% over the last year.

Backtested Results For LNCE: Over the last 5 years, the RSI(14) alert was triggered 9 times. Trading the above-mentioned strategy resulted in 9 winners and 0 losers (100% success rate). The strategy returned 59.94%, higher than the buy and hold return of -3.26%.

7. New Jersey Resources Corp. (NYSE:NJR): Gas Utilities Industry. Market cap of $1.69B. RSI(14) at 33.35.

TTM Long Term Debt/Equity 58.28% vs. industry average at 133.59%. TTM Total Debt/Assets 25.28% vs. industry average at 33.8%. TTM Total Debt/Equity 86.86% vs. industry average at 160.51%. Current ratio at 1.17 vs. industry average at 1.02. Short float at 5.15%, which implies a short ratio of 10.63 days. The stock has gained 20.18% over the last year.

Backtested Results For NJR: Over the last 5 years, the RSI(14) alert was triggered 6 times. Trading the above-mentioned strategy resulted in 4 winners and 2 losers (66.67% success rate). The strategy returned 27.04%, lower than the buy and hold return of 39.87%.

8. Olin Corp. (NYSE:OLN): Chemicals Industry. Market cap of $1.49B. RSI(14) at 37.95.

TTM Long Term Debt/Equity 48.17% vs. industry average at 72.78%. TTM Total Debt/Assets 21.36% vs. industry average at 25.67%. TTM Total Debt/Equity 50.48% vs. industry average at 91.03%. Current ratio at 2.63 vs. industry average at 1.78. Short float at 6.77%, which implies a short ratio of 7.53 days. The stock has gained 19.05% over the last year.

Backtested Results For OLN: Over the last 5 years, the RSI(14) alert was triggered 8 times. Trading the above-mentioned strategy resulted in 5 winners and 3 losers (62.5% success rate). The strategy returned 19.04%, higher than the buy and hold return of -7.5%.

9. Rex Energy Corporation (NASDAQ:REXX): Oil & Gas Drilling & Exploration Industry. Market cap of $498.23M. RSI(14) at 38.42.

TTM Long Term Debt/Equity 10.03% vs. industry average at 92.55%. TTM Total Debt/Assets 7.51% vs. industry average at 24.57%. TTM Total Debt/Equity 10.03% vs. industry average at 99.21%. Current ratio at 1.56 vs. industry average at 1.4. Short float at 19.41%, which implies a short ratio of 12.46 days. The stock has lost -16.64% over the last year.

Backtested Results For REXX: Over the last 5 years, the RSI(14) alert was triggered 5 times. Trading the above-mentioned strategy resulted in 4 winners and 1 loser (80% success rate). The strategy returned 57.5%, higher than the buy and hold return of 13.03%.

10. Schweitzer-Mauduit International Inc. (NYSE:SWM)
: Paper & Paper Products Industry. Market cap of $1.03B. RSI(14) at 37.95.

TTM Long Term Debt/Equity 8.38% vs. industry average at 79.89%. TTM Total Debt/Assets 6.26% vs. industry average at 31.03%. TTM Total Debt/Equity 9.9% vs. industry average at 89.4%. Current ratio at 1.83 vs. industry average at 1.71. Short float at 3.99%, which implies a short ratio of 2.55 days. The stock has gained 13.05% over the last year.

Backtested Results For SWM: Over the last 5 years, the RSI(14) alert was triggered 8 times. Trading the above-mentioned strategy resulted in 6 winners and 2 losers (75% success rate). The strategy returned 32.33%, lower than the buy and hold return of 120.52%.

11. Molson Coors Brewing Company (NYSE:TAP): Brewers Industry. Market cap of $8.38B. RSI(14) at 30.88.

TTM Long Term Debt/Equity 21.02% vs. industry average at 56.96%. TTM Total Debt/Assets 14.06% vs. industry average at 28.24%. TTM Total Debt/Equity 23.03% vs. industry average at 79.66%. Current ratio at 1.36 vs. industry average at 1.34. Short float at 1.67%, which implies a short ratio of 2.54 days. The stock has gained 18.71% over the last year.

Backtested Results For TAP: Over the last 5 years, the RSI(14) alert was triggered 9 times. Trading the above-mentioned strategy resulted in 5 winners and 4 losers (55.56% success rate). The strategy returned 6.8%, lower than the buy and hold return of 34.89%.

12. Transportadora de Gas Del Sur S.A. (NYSE:TGS): Gas Utilities Industry. Market cap of $904.14M. RSI(14) at 39.11.

TTM Long Term Debt/Equity 45.81% vs. industry average at 133.59%. TTM Total Debt/Assets 27.24% vs. industry average at 33.8%. TTM Total Debt/Equity 46.71% vs. industry average at 160.51%. Current ratio at 2.5 vs. industry average at 1.02. Short float at 0.43%, which implies a short ratio of 5.37 days. The stock has gained 97.57% over the last year.

Backtested Results For TGS: Over the last 5 years, the RSI(14) alert was triggered 5 times. Trading the above-mentioned strategy resulted in 4 winners and 1 loser (80% success rate). The strategy returned 11.6%, higher than the buy and hold return of 1.51%.

Disclosure: No positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.