8 Oversold Mega-Cap Stocks With Encouraging Inventory Trends

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Includes: CVS, FCX, GG, MON, NTR, OXY, PM, VALE
by: Kapitall

Inventory can be a helpful tool for analyzing the sales trends of a company.

To demonstrate this, we ran a screen on the 200 largest companies by market cap for those that are technically oversold, with RSI(14) below 40. We screened these stocks for those that are exhibiting encouraging inventory trends year-over-year: increases in quarterly revenue exceeding increases in quarterly inventory year-over-year, as well as inventory becoming a smaller portion of current assets.

To help understand why these trends are positive, think of why the opposite trends would be negative. If inventory were growing faster than revenue, it would probably indicate that the company is having trouble selling its inventory. Of course, other explanations can exist such as changes in company policy.

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.



Do you think these companies have strong sales trends? Use this list as a starting-off point for your own analysis.

List sorted by market cap.

1. Vale S.A. (NYSE:VALE): Engages in the exploration, production, and sale of basic metals in Brazil. Market cap of $119.02B. RSI(14) at 28.52. MRQ revenue has increased 55.20% ($14,989M vs. $9,658M y/y) while MRQ inventory has increased 38.54% ($5,273M vs. $3,806M y/y). Inventory/current assets has decreased from 20.12% to 16.65%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30. Might be undervalued at current levels, with a PEG ratio at 0.61, and P/FCF ratio at 14.83. The stock has performed poorly over the last month, losing 19.26%.

2. Philip Morris International, Inc. (NYSE:PM):
Engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Market cap of $109.57B. RSI(14) at 35.16. MRQ revenue has increased 16.40% ($20,234M vs. $17,383M y/y) while MRQ inventory has increased 5.36% ($7,904M vs. $7,502M y/y). Inventory/current assets has decreased from 58.05% to 55.15%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30. The stock has gained 17.15% over the last year.

3. Occidental Petroleum Corporation (NYSE:OXY):
Operates as an oil and gas exploration and production company primarily in the United States. Market cap of $58.11B. RSI(14) at 34.81. MRQ revenue has increased 33.88% ($6,208M vs. $4,637M y/y) while MRQ inventory has decreased 1.48% ($1,202M vs. $1,220M y/y). Inventory/current assets has decreased from 13.28% to 12.09%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30. The stock is currently stuck in a downtrend, trading 10.57% below its SMA20, 16.55% below its SMA50, and 25.9% below its SMA200. The stock has performed poorly over the last month, losing 17.11%.

4. CVS Caremark Corporation (NYSE:CVS):
Operates as a pharmacy services company in the United States. Market cap of $45.17B. RSI(14) at 36.29. MRQ revenue has increased 10.92% ($26,629M vs. $24,007M y/y) while MRQ inventory has decreased 2.68% ($10,111M vs. $10,389M y/y). Inventory/current assets has decreased from 60.16% to 53.03%, comparing 13 weeks ending 2011-06-30 to 13 weeks ending 2010-06-30. The stock has gained 7.11% over the last year.

5. Potash Corp. of Saskatchewan, Inc. (POT):
Produces and sells fertilizers and related industrial and feed products primarily in the United States and Canada. Market cap of $37.01B. RSI(14) at 26.17. MRQ revenue has increased 61.80% ($2,325M vs. $1,437M y/y) while MRQ inventory has decreased 9.81% ($597M vs. $661.9M y/y). Inventory/current assets has decreased from 33.65% to 25.78%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30. It's been a rough couple of days for the stock, losing 5.82% over the last week.

6. Goldcorp Inc. (NYSE:GG):
Engages in the acquisition, exploration, development, and operation of precious metal properties in Canada, the United States, Mexico, and Central and South America. Market cap of $36.87B. RSI(14) at 38.52. MRQ revenue has increased 62.33% ($1,323M vs. $815M y/y) while MRQ inventory has increased 30.41% ($476M vs. $365M y/y). Inventory/current assets has decreased from 28.47% to 18.39%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30. The stock has performed poorly over the last month, losing 12.04%.

7. Monsanto Co. (NYSE:MON): Provides agricultural products for farmers in the United States and internationally. Market cap of $32.11B. RSI(14) at 33.93. MRQ revenue has increased 21.20% ($3,590M vs. $2,962M y/y) while MRQ inventory has decreased 0.74% ($2,826M vs. $2,847M y/y). Inventory/current assets has decreased from 36.04% to 31.45%, comparing 3 months ending 2011-05-31 to 3 months ending 2010-05-31. It's been a rough couple of days for the stock, losing 5.66% over the last week.

8. Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX):
Engages in the exploration, mining, and production of mineral resources. Market cap of $28.86B. RSI(14) at 25.25. MRQ revenue has increased 50.47% ($5,814M vs. $3,864M y/y) while MRQ inventory has increased 29.42% ($3,748M vs. $2,896M y/y). Inventory/current assets has decreased from 39.71% to 36.84%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30. Might be undervalued at current levels, with a PEG ratio at 0.64, and P/FCF ratio at 7.58. It's been a rough couple of days for the stock, losing 5.93% over the last week.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.