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If you utilize technical indicators to find out-of-favor stocks with upside potential, then this may be an interesting starting point for your own analysis.

To construct this list we looked for stocks with the RSI(14) below 40, a widely held indicator of oversold conditions. We then focused on those candidates that had seen rising ROE values for the recent quarter, on a year-over-year basis, and kept only those with:

  • Improving profit margin, i.e. higher Net Income/ Revenues
  • Improving asset turnover, i.e. higher Sales/Assets
  • And decreasing leverage ratio, i.e. lower Assets/Equity

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.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Considering these data points, which of these stocks think are bound to rally and which are simply falling knives?

1. ReneSola Ltd. (NYSE:SOL): Semiconductor Industry. Market cap of $625.32M. RSI(14) at 37.62. Return on equity increased from -7.09% to 10.28%. When analyzing the sources of return, net profit margin increased from -15.63% to 15.8%. Sales/assets increased from 0.14 to 0.24, while assets/equity decreased from 3.24 to 2.71. This is a risky stock that is significantly more volatile than the overall market (beta = 2.94). The stock has performed poorly over the last month, losing 16.86%.

2. Move, Inc. (NASDAQ:MOVE): Business Services Industry. Market cap of $306.33M. RSI(14) at 32.89. Return on equity increased from -10.26% to 0.57%. When analyzing the sources of return, net profit margin increased from -38.92% to 1.49%. Sales/assets increased from 0.17 to 0.3, while assets/equity decreased from 1.55 to 1.27. The stock has performed poorly over the last month, losing 19.92%.

3. Georgia Gulf Corp. (GGC): Synthetics Industry. Market cap of $962.71M. RSI(14) at 33.89. Return on equity increased from -5.17% to 2.63%. When analyzing the sources of return, net profit margin increased from -3.01% to 1.54%. Sales/assets increased from 0.37 to 0.43, while assets/equity decreased from 4.64 to 3.97. This is a risky stock that is significantly more volatile than the overall market (beta = 2.09). The stock has performed poorly over the last month, losing 27.2%.

4. QLogic Corp. (NASDAQ:QLGC): Semiconductor Industry. Market cap of $1.70B. RSI(14) at 35.09. Return on equity increased from -0.81% to 5.51%. When analyzing the sources of return, net profit margin increased from -3.31% to 21.88%. Sales/assets increased from 0.19 to 0.2, while assets/equity decreased from 1.29 to 1.26. The stock has performed poorly over the last month, losing 10.11%.

5. CBOE Holdings, Inc. (NASDAQ:CBOE): Diversified Investments Industry. Market cap of $2.33B. RSI(14) at 37.41. Return on equity increased from 10.77% to 16.33%. When analyzing the sources of return, net profit margin increased from 22.44% to 26.5%. Sales/assets increased from 0.16 to 0.39, while assets/equity decreased from 3 to 1.58. The stock is a short squeeze candidate, with a short float at 6.56% (equivalent to 7.95 days of average volume). It's been a rough couple of days for the stock, losing 8.16% over the last week.

6. IntraLinks Holdings, Inc. (NYSE:IL): Security Software & Services Industry. Market cap of $1.11B. RSI(14) at 34.61. Return on equity increased from -4.95% to 0.1%. When analyzing the sources of return, net profit margin increased from -13.72% to 0.55%. Sales/assets increased from 0.08 to 0.1, while assets/equity decreased from 4.51 to 1.79. The stock has performed poorly over the last month, losing 33.75%.

7. SK Telecom Co. Ltd. (NYSE:SKM): Wireless Communications Industry. Market cap of $11.98B. RSI(14) at 30.4. Return on equity increased from 7.11% to 11.02%. When analyzing the sources of return, net profit margin increased from 8.11% to 14.82%. Sales/assets increased from 0.34 to 0.37, while assets/equity decreased from 2.58 to 2.01.

8. Deere & Company (NYSE:DE): Farm & Construction Machinery Industry. Market cap of $36.10B. RSI(14) at 35.24. Return on equity increased from 9.48% to 12.11%. When analyzing the sources of return, net profit margin increased from 7.68% to 10.15%. Sales/assets increased from 0.17 to 0.19, while assets/equity decreased from 7.26 to 6.28.

9. Arch Coal Inc. (NYSE:ACI): Industrial Metals & Minerals Industry. Market cap of $4.86B. RSI(14) at 36.67. Return on equity increased from -0.09% to 2.45%. When analyzing the sources of return, net profit margin increased from -0.25% to 6.37%. Sales/assets increased from 0.15 to 0.18, while assets/equity decreased from 2.29 to 2.14. The stock has performed poorly over the last month, losing 11.35%.

10. PACCAR Inc. (NASDAQ:PCAR): Trucks & Other Vehicles Industry. Market cap of $18.07B. RSI(14) at 38.3. Return on equity increased from 1.35% to 3.47%. When analyzing the sources of return, net profit margin increased from 3.06% to 5.89%. Sales/assets increased from 0.16 to 0.22, while assets/equity decreased from 2.75 to 2.68. The stock has gained 22.34% over the last year.

11. Hollysys Automation Technologies, Ltd (NASDAQ:HOLI): Industrial Electrical Equipment Industry. Market cap of $456.84M. RSI(14) at 32.85. Return on equity increased from 2.39% to 3.72%. When analyzing the sources of return, net profit margin increased from 15.32% to 17.02%. Sales/assets increased from 0.09 to 0.13, while assets/equity decreased from 1.73 to 1.68. The stock is a short squeeze candidate, with a short float at 16.62% (equivalent to 9.12 days of average volume).

12. Skyworks Solutions Inc. (NASDAQ:SWKS): Semiconductor Industry. Market cap of $4.75B. RSI(14) at 30.13. Return on equity increased from 2.36% to 3.32%. When analyzing the sources of return, net profit margin increased from 11.65% to 15.35%. Sales/assets increased from 0.17 to 0.19, while assets/equity decreased from 1.19 to 1.14.

13. TriMas Corporation (NASDAQ:TRS): Industrial Equipment & Components Industry. Market cap of $723.23M. RSI(14) at 34.24. Return on equity increased from 8.25% to 9.03%. When analyzing the sources of return, net profit margin increased from 2.47% to 4.36%. Sales/assets increased from 0.26 to 0.29, while assets/equity decreased from 12.84 to 7.14. This is a risky stock that is significantly more volatile than the overall market (beta = 2.56). The stock has performed poorly over the last month, losing 10.93%.

14. The Dow Chemical Company (NYSE:DOW): Chemicals Industry. Market cap of $41.85B. RSI(14) at 35.87. Return on equity increased from 2.72% to 3.15%. When analyzing the sources of return, net profit margin increased from 4.11% to 4.82%. Sales/assets increased from 0.2 to 0.22, while assets/equity decreased from 3.31 to 2.97. This is a risky stock that is significantly more volatile than the overall market (beta = 2.28). The stock has performed poorly over the last month, losing 12.55%.

15. Corrections Corporation of America (NYSE:CXW): Property Management Industry. Market cap of $2.47B. RSI(14) at 36.53. Return on equity increased from 2.42% to 2.83%. When analyzing the sources of return, net profit margin increased from 8.6% to 9.42%. Sales/assets increased from 0.14 to 0.15, while assets/equity decreased from 2.01 to 2. The stock has gained 15.53% over the last year.

*Data sourced from Google Finance and Finviz. Data collected on the afternoon of Tuesday May 31st.

Source: Rebound Ideas: 15 Oversold Stocks With Great Profit Trends