Five for Friday- SimpleVisor’s Most Oversold Stocks

This week we employ our proprietary Relative and Absolute analysis within SimpleVisor to provide the most oversold stocks. 

Our relative analysis model generates a history of the price ratio of each sector to the S&P 500, as well as the sector’s top ten holdings versus the sector ETF itself. It then applies multiple technical studies to the data. It scores them based on the degree to which each technical study is overbought or oversold and how they changed over various periods. Indicators are weighted by importance. The analyses include 20-, 50-, and 200-day moving averages, MACD, RSI, and Williams. The total score is normalized to a range of +1 to -1. We consider a score of +/- .75 strongly overbought or oversold. We have yet to see a perfect score of +/-1.

The absolute analysis model uses identical calculations, but they are solely based on the price of the ETF or stock, not a ratio versus another index.

We combine relative and absolute analysis with helping us find overbought or oversold companies relative to the S&P 500 and its respective sector. SimpleVisor can chart the movement of the two indicators over time. For example, the graph below, combining our relative and absolute scores, shows how the utility and discretionary sectors have trended over the last four weeks. Utilities were deeply oversold on a relative and absolute basis four weeks ago but have since become slightly overbought on both gauges. At the same time, the discretionary sector was near fair value four weeks ago but has since become very oversold on a relative basis and slightly oversold on an absolute basis.

Often the most oversold or most overbought scores revert toward fair value. The overbought/oversold signals are strengthened when our proprietary money flow analysis provides a similar conclusion.  

Screening Criteria

We considered the following factors when screening:

• Top Ten holdings of the four most oversold sector ETFs: Discretionary (XLY), Financial (XLF), Industrials (XLI), and Real estate (XLRE)
• Lowest combined relative and absolute scores versus the sector ETF
• We chose six stocks to ensure one from each sector was included.

Company Summaries

Tesla, Inc. (TSLA)

Bank of America Corporation (BAC)

Deere & Company (DE)

Automatic Data Processing, Inc. (ADP)

Digital Realty Trust, Inc. (DLR)

Realty Income Corporation (O)

Five for Friday

Five for Friday uses stock screens to produce five stocks that we expect will outperform if a particular investment theme plays out in the future. Investment themes may be relevant to the current or expected market, industry and/or economic trends. Investment themes may not always represent our current forecast. 

Disclosure

This report is not a recommendation to buy or sell the named securities. We intend to elicit ideas about stocks meeting specific criteria and investment themes. Please read our disclosures carefully and do your own research before investing.