In March, I wrote
about 10 stocks that I thought were oversold and likely to rebound. Since then, all 10 of are up, four of them (RAIT Investment Trust (RAS
); Hartford Financial Services (HIG
); MGM Mirage (MGM
); and NutriSystem (NTRI
)) significantly -- about 10 to 12%, in just a couple weeks. Others are up about 5%, and the only one that is barely up is Cisco (CSCO
). Because of this I am keeping Cisco on the list for this month. I am going to continue with more "coiled spring" stocks at least once per month. Below are my top coiled spring stocks for April.
These shares have reasonable PE ratios 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 a 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, almost all of which have RSI levels in the 30s or less.
Net Servicos de Comunicacao (NETC
) shares are trading at $8.57. These shares have an RSI of 33, which indicates the shares are oversold. NETC provides cable television and Internet services in Brazil. This stock has dropped hard in the past several weeks, from about $13 to current levels. The 50-day moving average is $10.22 and the 200-day moving average is $12.06. The 52-week range is $8.37 to $14.20. Book value is stated at $6.69.
These shares dropped after earnings were released. The earnings were not bad, and I think the market has overreacted to the fact that profits were 2 cents less than in the comparable period last year. NETC reported fourth quarter net income at $78.3 million or 23 cents per share compared with net income of $81.2 million or 25 cents per share in the year-ago quarter. You can read more about its earnings report here
. Thanks to this sell-off, you can buy shares of this company near the 52-week lows and participate in the growth in Brazil.
Central European Distribution Corp. (CEDC
) shares are trading at $11.18. These shares have an RSI of 27, which indicates the shares are very oversold. CEDC is a leading beverage distribution company based in Pennsylvania. The 50-day moving average is $17.61 and the 200-day moving average is $22.71. Earnings estimates for CEDC are $1.02 per share in 2011 and $1.52 for 2012. The 52-week range is $10.77 to $39.95. Book value is stated at $22.19.
It reported earnings that disappointed the market and shares dropped off a cliff, from about $23 down to around $11. Some analysts downgraded the stock after this earnings report and many shorts climbed aboard, which only further punished the stock. Robert Weinstein wrote a good article
about CEDC and the challenges it faces. With the shares down to around $11, I think it is time to start buying in stages, so you can take advantage of any further weakness.
Books-A-Million, Inc. (BAMM
) shares are trading at $4.06. These shares have an RSI of about 26.6, which indicates the shares are very oversold. BAMM is a leading book retailing company. The 50-day moving average is $5.40 and the 200-day moving average is $5.87. BAMM pays a dividend of 20 cents per share, which is equivalent to a yield of 4.8%.
Book retailers have seen plenty of bad news, from major players like Borders (BGP), Barnes & Noble (BKS
) and others. BAMM reported earnings that disappointed investors: For the fiscal year ended January 29, 2011, BAMM reported net income of $8.9 million, or $0.57 per diluted share, compared with net income of $13.8 million, or $0.88 per diluted share, for the prior fiscal year. The book value is stated at $7.15, and BAMM remains profitable, with a strong balance sheet. I think this stock is oversold and could rebound nicely, although I would view this as a short-term trading opportunity only.
Best Buy Co. (BBY
) shares are trading at $28.35. These shares have a relative strength index of about 26.75, which indicates the shares are very oversold. BBY is a leading retailer of electronics. The 50-day moving average is $32.34 and the 200-day moving average is $36.09. Earnings estimates for BBY are $3.46 per share in 2011 and $3.69 for 2012. The 52-week range is $28.35 to $48.83. Book value is stated at $18.54.
It reported earnings and guidance that disappointed the market. Investors are also concerned that Best Buy is losing market share to online retailers like Amazon.com (AMZN
). I think these concerns are priced into the stock now and the shares look cheap. I would only average in, though, so you can take advantage of any further drops, if any. Many people see products they want to buy at Best Buy and then go order the item online at places like Amazon.com that often (depending on the state where you live) won't charge sales tax and offer free shipping. This is likely to change in the future, as many states are trying to find ways to make online retailers collect and pay sales taxes. This would level the playing field for Best Buy.
Felcor Lodging Trust (FCH
) is trading around $6.02. These shares have a relative strength index of about 36, which indicates the shares are oversold. Felcor is based in Texas and invests primarily in hotel properties. These shares have traded in a range between $3.91 to $8.99 in the last 52 weeks. The 50-day moving average is $7.08 and the 200-day moving average is $6.04.
Financial results have been improving for this company. Room rates have been rising for hotels along with occupancy rates. But, this stock dropped recently when FCH announced
it would sell 24 million shares at $6 each. Stocks often recover after a secondary offering and this might be a good trade, as a rebound is likely.
JA Solar Company, Ltd. (JASO
) shares have also pulled back sharply, to about $6.57. The relative strength index is about 43. These shares have fallen from a 52-week high of $10.24. The 50-day moving average is $7.17 and the 200-day moving average is $7.12. JASO has earnings estimates of about $1.40 per share for 2011. This puts the PE ratio at about 5.
On April 1, JASO shares were cut to neutral from outperform by Macquarie. That seems to have contributed to the recent drop. Book value is listed at $6.22 per share. When you can buy these shares for close to book value and about 5x earnings, why hesitate? For great analysis on JASO, and other solar stocks read an article by Investing Hobo here
Cisco Systems, Inc. shares are trading at $17.05. The relative strength index is 32, which indicates the stock is still 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 $18.85 and the 200-day moving average of $20.91. CSCO now trades for about 10 times earnings, which I think is a long-term bargain.
Few people seem to want these shares, which makes it a perfect time to buy. It may take longer for Cisco shares to rebound than some of these other names, but I am confident they will.
LGL Group, Inc. (LGL) shares are trading at $13.60. The relative strength index is 27, which indicates the stock is very oversold. LGL is a maker of scientific and technical instruments, based in Florida. The shares currently trade well below the 50-day moving average of $18.04 and the 200-day moving average of $18.89.
Shares dropped over concerns that the crisis in Japan could impact financials results for LGL. The company issued a response to those concerns. The book value is $8.32. The stock is also cheap from a PE ratio perspective. This company recently reported a very strong jump in sales for 2010.