Stocks that are oversold can provide an opportunity to buy an asset at a bargain price. Some of these stocks are not worth your time, while others can provide an attractive investment opportunity. These price moves can happen for a variety of reasons like missed earnings, the departure of key personnel, lawsuits, or other material events.
One way an investor can filter oversold stocks is based on institutional ownership. Stocks with high institutional ownership are attractive because financial institutions tend to be long-term investors that do not turnover their investments often. This is due to the large amount of resources needed to research and accumulate a position in a company. It is also common for institutions to support their investment when the company is maneuvering through "rough waters."
The short interest of a stock is also important in evaluating an equity that could be oversold. The percentage is calculated by dividing the number of shares sold by investors but have not been covered divided by the number of shares outstanding. A low short interest could reflect that investors are not as bearish as the recent drop in price would dictate.
Below is a list of 5 companies that could provide a starting point for your analysis. The stock screen began by looking at companies that had a Relative Strength Index (14) oversold of 40%. Relative Strength Index is a good indicator to measure when a stock could be overbought or oversold based on its upward or downward close-to-close movement. The oversold stocks were filtered further by selecting equities with an institutional ownership greater than 80%. Finally, the short interest in the stock had to be below 5.5% of shares outstanding.
1. LTC Properties Inc. (LTC)
REIT - Healthcare Facilities
LTC Properties, Inc. operates as a health care real estate investment trust (REIT) in the United States. It invests in senior housing and long term healthcare properties, including skilled nursing properties, assisted living properties, independent living properties, and combinations through mortgage loans, property lease transactions, and other investments.
Its portfolio consists of 89 skilled nursing properties, 102 assisted living properties, 14 other senior housing properties, 2 schools, and a parcel of land under development. As a REIT, the company would not be subject to federal income tax, if it distributes at least 90% of net taxable income to its stockholders. LTC Properties, Inc. was founded in 1992 and is based in Westlake Village, California.
2. Omega Healthcare Investors, Inc (OHI)
REIT - Healthcare Facilities
Omega Healthcare Investors, Inc. operates as a real estate investment trust (REIT) in the United States. The company invests in healthcare facilities, principally long-term healthcare facilities in the United States. It provides lease or mortgage financing to qualified operators of skilled nursing facilities (SNFs), as well as to assisted living facilities (ALFs), independent living facilities (ILFs), and rehabilitation and acute care facilities.
As of March 31, 2011, the company's portfolio of real estate investments consisted of 400 healthcare facilities, including 370 SNFs, 10 ALFs, 5 specialty facilities, fixed rate mortgages on 13 SNFs, and 2 SNFs that are held-for-sale located in 35 states. Omega Healthcare Investors, Inc. has been qualified as a REIT for federal income tax purposes.
As a REIT, it would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its shareholders. The company was founded in 1992 and is based in Hunt Valley, Maryland.
3. Post Properties Inc. (PPS)
REIT - Residential
Post Properties Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It primarily develops, owns, and manages multi-family apartment communities. Post Properties, Inc. was founded in 1971 and is based in Atlanta, Georgia.
4. Waste Management, Inc. (WM)
Waste Management, Inc., through its subsidiaries, provides waste management services to residential, commercial, industrial, and municipal customers in North America. It offers collection, transfer, recycling, and disposal services. The company also owns, develops, and operates waste-to-energy and landfill gas-to-energy facilities in the United States. Its collection services include picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility, or disposal site; and recycling operations comprise materials processing, plastics materials recycling, and commodities recycling.
In addition, it provides recycling brokerage services consisting of managing the marketing of recyclable materials for third parties; electronic recycling services, such as collection, sorting, and disassembling of discarded computers, communications equipment, and other electronic equipment; and sustainability services to businesses and organizations, including in-plant services that provide full-service waste management solutions and consulting services at customers' facilities.
Further, the company engages in the landfill gas-to-energy operations comprising recovering of methane gas produced naturally as waste decomposes in landfills for use in the generation of electricity; rental and service of portable restroom facilities to municipalities and commercial customers under the Port-o-Let name; and provision of street and parking lot sweeping services.
Additionally, it offers medical waste services for healthcare facilities, pharmacies, and individuals; portable self-storage services; and fluorescent lamp recycling services, as well as involved in the acquisition and development of oil and gas producing properties. The company was formerly known as USA Waste Services, Inc. and changed its name to Waste Management, Inc. in 1998. Waste Management, Inc. was incorporated in 1987 and is headquartered in Houston, Texas.
5. Ashland Inc. (ASH)
Ashland Inc. operates as a specialty chemicals company in the United States and internationally. It operates through four segments: Specialty Ingredients, Water Technologies, Performance Materials, and Consumer Markets. The Specialty Ingredients segment produces cellulose ethers; and specialty and functional ingredients for use in personal care, pharmaceutical, food and beverage, coatings, construction, and energy markets. This segment's solutions offer an array of properties, such as thickening and rheology control, water retention, adhesive strength, binding power, film formation, conditioning and deposition, colloid stabilization, suspension, and ultraviolet light filtration and color.
The Water Technologies segment provides paper-making chemicals and specialty chemicals. This segment offers deposit and scale control agents, defoamers, biocides, retention aids, frothers and collection aids, crepe and release additives, and other process additives for the pulp and paper manufacturing, mining and extraction, food processing, power, oil refining, chemicals processing, and general manufacturing industries; specialized chemicals and consulting services for the utility water treatment; and feed and control systems, proprietary monitoring devices, and remote system surveillance equipment.
The Performance Materials segment produces polyester and vinyl ester resins, gelcoats, adhesives, coatings, and elastomers serving the construction, transportation, infrastructure, packaging and converting, marine, and energy markets; and offers chemicals and materials to the foundry industry. The Consumer Markets segment produces and markets packaged automotive lubricants and chemicals, as well as appearance, automotive reconditioning, and antifreeze products to the private passenger car, light truck, and heavy duty markets. This segment also operates and franchises Valvoline Instant Oil Change centers. The company was founded in 1918 and is headquartered in Covington, Kentucky.
Company description, financial data and graphs sourced from finviz.com.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.