In preparation for the week ahead (starting June 4, 2012), I would like to look at oversold equities (RSI below 40) for possible earnings plays. The list for the current week's oversold stocks reporting earnings can be found here.
(all charts courtesy of finviz.com)
Navistar International Corporation (NAV) - The consumer goods company that makes mostly trucks is trading at $27.94 per share, down 26% year to date. It has a history of volatile earnings but with a forward p/e at 4.6 and considerable cash on hand we are getting close to a price where NAV is worth the risk. For those who think there may be some downside left in the market, consider buying medium-term puts in the lower 20s.
Pep Boys - Manny, Moe & Jack (PBY) - Anytime a buyout gets cancelled there is going to be some blood in the streets and PBY is no exception. The sale to the PE firm Gores Group has been called off and the only thing PBY shareholders get is a $50M termination fee. After barely making a profit last quarter the boys have some work cut out for them. Shares are trading at about 9.5x forward earnings and sport an RSI of 21.
Francesca's Holdings Corporation (FRAN) - The new women's fashion retailer is trading at $23.46 per share, up 35% YTD. It traded in the mid 30s earlier in the year before the market realized the explosion in growth it had experienced had subsided. Currently trading at 22x forward earnings it still has a hefty price tag at first glance, but when you consider earnings have been growing at about 32 per annum it seems about right. An investment in FRAN at these prices means you can't be wrong. I suggest waiting for earnings on hopes it sells off further before you dip your toes in.
Oracle Corporation (ORCL) - The technological behemoth is trading at $26.47 per share, up 3% YTD. Trading at 10x forward earnings and sporting an almost 1% yield it seems fairly valued in my opinion. It will be interesting what the company sees as the prospects for the industry are overall on the conference call. Hopefully the outlook is bright and we can head into next weekend with some confidence that the market can finally move higher.