Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message| ()  

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) levels below 30, which usually signals oversold conditions.

Additionally, over the last two years, insider purchases have outnumbered insider sales, suggesting that those closest to the company remain optimistic on the outlook.

Based on RSI(14) levels and the enthusiasm of insiders, this list might offer an interesting starting point for your own analysis.

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.)

Insider data sourced from Fidelity, RSI(14) and short float data sourced from Finviz. 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.

The list has been sorted by the net number of shares purchased by insiders over the last two years.

1. Chelsea Therapeutics International Ltd. (CHTP): Biotechnology Industry. Market cap of $234.35M. RSI(14) at 28.47. Insiders purchased an average of 943,474 shares per year over the last two years. Short float at 10.62%, which implies a short ratio of 7 days. The stock has gained 89.29% over the last year.

Backtested Results For CHTP:
Over the last 5 years, the RSI(14) alert was triggered 8 times. Trading the above-mentioned strategy resulted in 4 winners and 4 losers (50% success rate). The strategy returned -46.08%, lower than the buy and hold return of 19.44%.

2. Bitstream Inc. (BITS): Application Software Industry. Market cap of $68.48M. RSI(14) at 29.08. Insiders purchased an average of 384,665 shares per year over the last two years. Short float at 0.12%, which implies a short ratio of 0.86 days. The stock has lost -16% over the last year.

Backtested Results For BITS: Over the last 5 years, the RSI(14) alert was triggered 8 times. Trading the above-mentioned strategy resulted in 4 winners and 4 losers (50% success rate). The strategy returned 7.55%, lower than the buy and hold return of 71.32%.

3. Westwood One Inc. (WWON): Entertainment Industry. Market cap of $154.5M. RSI(14) at 26.84. Insiders purchased an average of 384,491 shares per year over the last two years. Short float at 4.58%, which implies a short ratio of 24.9 days. The stock has gained 20.03% over the last year.

Backtested Results For WWON: Over the last 5 years, the RSI(14) alert was triggered 9 times. Trading the above-mentioned strategy resulted in 4 winners and 5 losers (44.44% success rate). The strategy returned -156.36%, lower than the buy and hold return of -99.78%.

4. Network Equipment Technologies Inc. (NWK): Networking & Communication Devices Industry. Market cap of $120.28M. RSI(14) at 29.78. Insiders purchased an average of 233,383 shares per year over the last two years. Short float at 5.61%, which implies a short ratio of 16.19 days. The stock has lost -17.77% over the last year.

Backtested Results For NWK: Over the last 5 years, the RSI(14) alert was triggered 11 times. Trading the above-mentioned strategy resulted in 8 winners and 3 losers (72.73% success rate). The strategy returned 87.93%, higher than the buy and hold return of -0.25%.

5. O'Charley's Inc. (CHUX): Restaurants Industry. Market cap of $129.97M. RSI(14) at 26.72. Insiders purchased an average of 72,318 shares per year over the last two years. Short float at 10.69%, which implies a short ratio of 15.73 days. The stock has lost -26.66% over the last year.

Backtested Results For CHUX: Over the last 5 years, the RSI(14) alert was triggered 6 times. Trading the above-mentioned strategy resulted in 2 winners and 4 losers (33.33% success rate). The strategy returned -61.63%, lower than the buy and hold return of -61.35%.

6. Idenix Pharmaceuticals Inc. (IDIX): Biotechnology Industry. Market cap of $220.37M. RSI(14) at 20.61. Insiders purchased an average of 52,187 shares per year over the last two years. Short float at 6.51%, which implies a short ratio of 12.63 days. The stock has lost -0.66% over the last year.

Backtested Results For IDIX: 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 -49.8%, higher than the buy and hold return of -84.75%.

7. BRT Realty Trust (BRT): Mortgage Investment Industry. Market cap of $95.82M. RSI(14) at 29.99. Insiders purchased an average of 33,715 shares per year over the last two years. Short float at 0.06%, which implies a short ratio of 0.69 days. The stock has gained 40.41% over the last year.

Backtested Results For BRT: Over the last 5 years, the RSI(14) alert was triggered 9 times. Trading the above-mentioned strategy resulted in 8 winners and 1 loser (88.89% success rate). The strategy returned 122.53%, higher than the buy and hold return of -72.11%.

8. Arrowhead Research Corp. (ARWR): Research Services Industry. Market cap of $58.17M. RSI(14) at 28.45. Insiders purchased an average of 17,500 shares per year over the last two years. Short float at 1.88%, which implies a short ratio of 5.69 days. The stock has gained 39.66% over the last year.

Backtested Results For ARWR: Over the last 5 years, the RSI(14) alert was triggered 9 times. Trading the above-mentioned strategy resulted in 7 winners and 2 losers (77.78% success rate). The strategy returned 112.45%, higher than the buy and hold return of -84.47%.

9. Sparton Corp. (SPA): Diversified Electronics Industry. Market cap of $77.98M. RSI(14) at 28.23. Insiders purchased an average of 15,294 shares per year over the last two years. Short float at 0.32%, which implies a short ratio of 0.62 days. The stock has gained 25.08% over the last year.

Backtested Results For SPA: Over the last 5 years, the RSI(14) alert was triggered 7 times. Trading the above-mentioned strategy resulted in 4 winners and 3 losers (57.14% success rate). The strategy returned -2.13%, higher than the buy and hold return of -8.16%.

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

Source: Top 9 Most Oversold Stocks Being Snapped Up by Insiders