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With the recent volatility in the markets and the correction due to the Japan crisis, some stocks have been hit very hard recently. This has created some potential buying opportunities. The stocks below are trading at valuations that might be a real buying opportunity. Some of these stocks fell on earnings disappointments, which often create exaggerated, temporary drops in the share prices. Others are down due to a number of issues, including the recent market correction.
Famed investor Doug Kass said on CNBC yesterday that the stock market in general is oversold, due to the crisis in Japan. Oversold stocks and markets can rebound sharply for many reasons, including a return to normal valuations and/or short covering.
These shares have reasonable PE ratios, strong balance sheets and are oversold. In particular, I am looking at earnings and the Relative Strength Index (RSI) levels which can indicate oversold conditions. Stocks with an RSI rating around 30 or below can signal that the shares are oversold and due for a rebound. Stocks with an RSI rating around 70 or more can be considered overbought.
Some of these companies are down so hard that they may rebound sharply, like a coiled spring. Here are the companies, which all have RSI levels in the 30s or below. Some are even under 20 now:
RAIT Financial Trust (NYSE:RAS): Shares are trading at $2.26. These shares have an RSI of 29, which indicates the shares are oversold. RAIT is a real estate investment trust. The stock dropped hard early this week from about $3, when the company announced an offering of $100 million in convertible notes. The 50-day moving average is $3 and the 200-day moving average is $2.12.
Hewlett Packard (NYSE:HPQ): Shares are trading at $40.14. These shares have an RSI of 27, which indicates the shares are oversold. HPQ is a leading technology company with products ranging from computers to printers. It reported earnings that disappointed the market and shares dropped, then dropped further due to the issues in Japan. The 50-day moving average is $45.30 and the 200-day moving average is $43.41. Earnings estimates for HPQ are just over $5 per share in 2011 and $5.69 for 2012.
Hartford Financial (NYSE:HIG): Shares are trading at $24.75. These shares have an RSI of about 30, which indicates the shares are oversold. HIG is a leading insurance company. HIG's shares have fallen with the markets and also due to concerns about policies it has in Japan. The 50-day moving average is $28.37 and the 200-day moving average is $24.62. Earnings estimates for HIG are $3.80 per share in 2011. HIG pays a dividend of about 40 cents per share, which is equivalent to a yield of 1.5%.

Akamai Technologies, Inc. (NASDAQ:AKAM): Shares are trading at $34.96. These shares have an RSI of about 19, which indicates the shares are very oversold. AKAM is a leading Internet service company that helps accelerate and deliver website content. It reported earnings that disappointed the market; the shares then fell further with the markets. The 50-day moving average is $44.04 and the 200-day moving average is $46.24. Earnings estimates for AKAM are just over $1.60 per share in 2011 and $1.83 for 2012.

MGM Resorts (NYSE:MGM): Shares are trading at $12.33. These shares have an RSI of about 29, which indicates the shares are oversold. MGM is a major hotel and casino company based in Las Vegas. The 50-day moving average is $14.75 and the 200-day moving average is $12.30. Earnings estimates for MGM are for a loss of about 62 cents per share in 2011.

Cisco Systems, Inc. (NASDAQ:CSCO): Shares are trading at $17.05. The RSI is 19, which indicates the stock is very oversold. Cisco is a premier networking hardware company that saw its shares fall on earnings results. The shares currently trade well below the 50-day moving average of $19.86 and the 200-day moving average of $21.36. Cisco has announced plans to pay a dividend in 2011, which could be a catalyst for these shares. CSCO now trades for about 10 times earnings which I think is a long term bargain.

Dry Ships (NASDAQ:DRYS): Shares are trading at $4.50. These shares have an RSI of 28, which indicates the shares are oversold. Dry Ships operates drybulk ships and drilling rigs. The stock has dropped from about $5 per share. The 50-day moving average is $5.02 and the 200-day moving average is $4.71. The earnings estimates for DRYS are 91 cents for 2011.

Goldman Sachs Group, Inc., (NYSE:GS): Shares are trading at $154.38. These shares have an RSI of about 32, which indicates the shares are oversold. Goldman Sachs is a major investment banking company based in New York. The 50-day moving average is about $165.20 and the 200-day moving average is $154.55. Earnings estimates for GS are $16.84 per share in 2011.

Nutrisystems, Inc. (NASDAQ:NTRI): Shares are trading at $13.19. These shares have an RSI of about 29, which indicates the shares are oversold. Nutrisystems provides weight-loss plans. The 50-day moving average is $17.75 and the 200-day moving average is $19.41. Earnings estimates for NTRI are 46 cents per share in 2011.

Finisar Corp. (NASDAQ:FNSR): Shares are trading at $22.88. These shares have an RSI of about 25, which indicates the shares are very oversold. Finisar manufactures networking equipment. The 50-day moving average is $35.06 and the 200-day moving average is $22.46. Earnings estimates for FNSR are $1.55 per share in 2011.

The data is sourced from Yahoo Finance. The information and data are believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.

Source: Oversold: 10 'Coiled Spring' Stocks