The markets have been declining rapidly for several weeks now. With this kind of broad drop in stock prices, it's not hard to find many undervalued and solid companies that have great rebound potential. I call these "coiled spring" stocks because these companies are down so hard that they may rebound sharply like a coiled spring. I believe these stocks are great buys right now, but the markets can be irrational and drive great stocks even lower, so it makes sense to scale into these positions, so you can take advantage of any future dips. Sometimes, stocks will bottom out by having a capitulation day, whereby the price drops and volume surges. If any of these stocks see that type of event, I would buy more aggressively.
All of these stocks have hit oversold levels in recent weeks. In particular, I am looking at earnings and the Relative Strength Index (RSI) levels on some of these stocks, 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. To learn more about RSI, read this. Here are the stocks for June, almost all of which have RSI levels in the 30s or below.
Hewlett Packard (HPQ)
shares are trading at $22.54. HPQ is a leading technology company with products ranging from computers to printers. The RSI for HPQ is about 36, so these shares are at oversold levels. The 50-day moving average is $28.56 and the 200-day moving average is $37.67. Earnings estimates for HPQ are at $4.84 per share in 2011, and $4.78 for 2012. This gives HPQ a super low PE ratio of only about 5. HPQ pays a dividend of 48 cents per share, which is a yield of 2.1%. With a PE ratio of 5, chances are these shares have hit rock bottom and are a solid long-term buy. The expectations are extremely low at Hewlett Packard, so there is a fairly good chance the newly appointed CEO, Meg Whitman will be able to provide better-than- expected results in the coming months.
Coeur d'Alene Mines Corporation (CDE)
is trading at $23.14. CDE is a silver and precious metals company based in Idaho. The RSI for CDE is about 30, so these shares are at very oversold levels. These shares have a 52-week range of $18.67 and $37.59. The 50-day moving average is $27.14 and the 200-day moving average is $27.60. Earnings estimates for CDE are for a profit $2.23 per share in 2011, and profits of $3.90 per share in 2012. These shares are oversold and look cheap around these levels. It makes sense to buy in stages, and see if these shares have truly bottomed out.
Weatherford International (WFT)
is trading around $13.13. Weatherford is a leading provider of equipment and services to the oil and gas industry, based in Switzerland. The RSI for WFT is about 32, so these shares are at very oversold levels.These shares have traded in a range of $12.62 to $26.25 in the last 52 weeks. The 50-day moving average is $17.29 and the 200-day moving average is $20.15. WFT is estimated to earn about 88 cents per share in 2011 and $1.65 for 2012.
Energy XXI (EXXI)
is trading around $21.50. Energy XXI is an independent oil and gas company, based in Bermuda. These shares have traded in a range of $20.87 to $37.20 in the last 52 weeks. The 50-day moving average is $26.99 and the 200-day moving average is $30.46. EXXI is estimated to earn about $2.55 per share in 2011 and $3.52 in 2012. Analysts see earnings estimates for EXXI jumping to $3.52 in 2012, as new wells come into play and rising energy prices boost profit margins. Also, this company should benefit as waiting times and regulations for drilling permits in the Gulf of Mexico improve.
United States Steel Corp (X)
shares are trading at $22.47. United States Steel is a leading maker of steel products. The RSI for X is about 29, so these shares are at very oversold levels. These shares have traded in a range of $21.73 to $64.03 in the past 52 weeks. The 50-day moving average is $31.54 and the 200-day moving average is $46.63. X is estimated to earn about $1.45 per share in 2011 and $4.18 in 2012. X pays a dividend of 20 cents per share, which is equivalent to a .9% yield. The PE ratio and other valuation metrics indicate these shares are cheap. I think it makes sense to start buying now, and more later on any further weakness.
Stillwater Mining Co. (SWC)
shares are trading at $8.49. Stillwater is a leading producer of palladium and platinum. The RSI for SWC is about 19, so these shares are at extremely oversold levels. These shares have traded in a range of $8.35 to $25.90 in the past 52 weeks. The 50-day moving average is $14.18 and the 200-day moving average is $19.55. SWC is estimated to earn about $1.50 per share in 2011 and $1.58 in 2012. Stillwater recently agreed to buy another company in order to diversify into copper and gold. The recent plunge in precious metals prices has slammed this stock, so I think it is time to buy and I expect a big rebound soon.
Igo, Inc. (IGO)
is trading around $1.27. Igo is a leading maker of batteries and other electronics equipment. These shares have traded in a range of $1.10 to $5.19 in the last 52 weeks. The 50-day moving average is $1.49 and the 200-day moving average is $2.59. IGOI is estimated to post a small loss in 2011 and earn a small profit for 2012. This is a volatile stock and shorts have taken this stock to very oversold levels. However, there are roughly 1.46 million shares short and based on average volume of about 65,000 shares per day, it would take about 21 days worth of volume for shorts to cover. A short covering rally could ignite this stock very soon. See the short interest here
Data sourced from Yahoo Finance and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made.
I am long SWC
. I may buy all of these stocks soon.
Disclaimer: Rougemont is not a registered investment advisor and does not provide specific investment advice. This information is solely educational in nature and not intended to serve as the basis for any investment decision.