13 Extremely Oversold Consumer Stocks

Clearly there is a lot of investor angst in the Consumer Discretionary sector. As this is October, a month traditionally that begins the season where professional investors attempt to reap those tax-losses and purge their year-end holdings of embarrassing mistakes, I wanted to see if there are any babies in the proverbial bathwater. The list below, generated using StockVal, includes stocks with current prices above 5, market capitalizations in excess of $100mm, PE below 20, Price/Book below 3 and Total Debt to Capital below 20%. Most importantly, they are all extremely oversold, based upon a measure of current price to trending price. In other words, these stocks are beaten down but don’t appear on the surface like they are terminal:

click to enlarge

I am familiar with a few of these names and believe that Chicos (CHS) and DSW (DSW) deserve a very close look. Men’s Wearhouse (MW) is on my watchlist and is a great company that just had a bad quarter in my opinion. I will be following up on this name with an article later this month. I expect that it will bottom between 37 and 40. Remember, screens like these are starting places only, but this is one beaten down group of companies.

Disclosure: None

Comments

[Uncle Bill:]

You're taking quite a chance buying these issues. The Consumer Discretionary SPYDR (XLY) is at its 90-day moving average, while the issues you suggest are about three standard deviations below that. The stocks you mentioned are among the riskiest available. CHS has an implied volatility of 49, and MW has an implied volatility of 42. By contrast, XLY carries an implied volatility of 22. These are the worst stocks in a bad group, abd they deserve thier status. Don't buy them.

2007 Oct 17 11:07 AM

[Alan Brochs...:]

Thanks for your comments. The XLY, as described in a previous article that I wrote, has Studs, Duds and Dogs. Most of these are obviously the Dogs, though MW, which is the one I really like, is actually more of a Dud as it has just retraced a gain. I generally don't like Dogs, but, in October, sometimes things get overdone. Take advantage potentially of institutional selling that more than punishes the stock price. By the way, these aren't buy recommendations - just a heads-up to check it out, as I intend to do myself.

2007 Oct 17 12:51 PM

[User 83337:]

Your chart text is unreadable on my pc. Tried the "view, largest", still unreadable!!!

Chico's has lost its way, needs severe changes in management, which includes finding or promoting people who know what the customer wants and how they and employees like to be treated.

2007 Oct 23 11:29 AM