- Vale S.A. (VALE)– A victim of systemic headwinds in the metals sphere. Its stock is oversold, but undervalued.
- Pure Storage (PSTG)– Its enterprise-driven solutions provide superior rollover attributes, as conveyed by its 31% annual recurring revenue.
- HyreCar (HYRE)– The company is early to market with its ancillary e-hailing concept. Additionally, the stock is undervalued on a sales basis.
- Freeport-McMoRan (FCX)– Horizontal integration in the primary production spaces allows it to smooth its earnings. Secondly, the stock remains a good inflation hedge.
- Power REIT (PW)– The REIT’s cash flows and book value has increased immensely, as illustrated by its promising valuation metrics.
- Invitae (NVTA)– We could see the stock re-emerge as a household name under the bulls. Invitae exhibits strong revenue growth and a lucrative portfolio of niche solutions.
- Shopify (SHOP)– Successful penetration of the small and medium-sized enterprise market and a wide range of offerings leaves Shopify in a promising position.
Searching for oversold stocks with potential requires much more than just looking at price. A stock’s price is random, believe it or not. There are many influencing variables that dictate price. The most prevalent influencing variables known by financial literature are fundamentals, valuation, momentum, and systemic sentiment.
The way I went about my screening process here is quite simple. I used the one-month Relative Strength Index (RSI) to identify oversold stocks (RSI around or below 30) and subsequently applied key influencing variables to forecast their future price movement. I didn’t define target prices here, but managed to identify seven oversold stocks worth scooping up in May.
Here is my list of seven oversold stocks to buy:
Oversold Stocks to Buy: Vale S.A. (VALE)
Systemic influence on Vale’s (NYSE:VALE) metals portfolio is the reason for its recent collapse in market value. The stock has traded down by 20% during the past month amid slow retail numbers from China. Additionally, stale Chinese retail numbers have caused pessimism among base metals investors as GDP growth is inextricably linked to ferrous and non-ferrous metal prices.
The stock exhibits an RSI of 24.4, suggesting it is oversold. I think Vale’s base metals portfolio is still undervalued as there is no sign of a medium-term drop in metal prices. Furthermore, Vale S.A. stock is underappreciated by the market as its price-to-earnings (PE) ratio is trading at an 80.10% discount to the sector and its price/earnings-to-growth (PEG) ratio of 0.01 indicates that its robust earnings-per-share growth justifies a higher stock price.
Pure Storage (PSTG)
This stock at its current price is a once-in-a-decade opportunity. Pure Storage (NYSE:PSTG) stock has performed well since listing as a public company, with a more than 50% gain. However, a value-seeking market in the midst of high inflation has caused the stock to drawdown by more than 15% over the past month for little reason.
I’m enthusiastic about data storage solutions. Pure Storage’s enterprise geared solutions allow it to increase its rollover rates. PSTG beat its fourth-quarter earnings estimate by 10 cents per share amid a staggering 31% year-over-year growth in recurring subscription revenue. Pure Storage stock holds an RSI of 44.81 and is certainly one to look out for.
Oversold Stocks to Buy: HyreCar (HYRE)
HyreCar (NASDAQ:HYRE) has drifted to a cumulative year-over-year loss worth 89%. The company recently beat its fourth-quarter earnings target by 12 cents per share. However, it missed out on its revenue estimate by $35.72 million.
HyreCar’s RSI of 34.35 tells the tale of recent market sentiment. However, this could all change, in my opinion. HyreCare is early to market with its ancillary business model in the e-hailing space, which provides a marketplace for freelancers searching for leasable vehicles. The company is progressing well from a quantitative vantage point as it has experienced annual EBITDA growth of 83.44% and 45.08% growth in diluted earnings per share.
HYRE stock is trading at a price-to-sales discount worth 1.15x, prompting me to classify the asset as good value for money.
Freeport McMoRan (FCX)
Freeport’s (NYSE:FCX) monthly drawdown of 21.8% doesn’t make any sense. I mean, sure, there are lockdowns in China that could prompt slower industrial reproduction in the short run, but this is a powerhouse of a company. FCX has a diversified portfolio of primary activities, including energy and metals, thus, allowing it to occupy the value chain horizontally.
The stock’s RSI of 31.29 is unjustified. A market overreaction has caused the stock to fall into undervalued territory. Freeport’s price-to-earnings ratio is now trading at a five-year discount of 23.88%. FCX’s medium-term prospects are bright as primary producer stocks remain attractive during this high-inflationary period.
Oversold Stocks to Buy: Power REIT (PW)
This REIT is more volatile than most others, as it focuses on renewable projects, meaning that it is speculating on future growth. I see tremendous opportunity with Power REIT (NYSE:PW), which has tripled in value since listing on the New York Stock Exchange. However, an interim correction has led the stock down by almost 60% year-to-date.
PW’s recent correction is likely due to investors cashing out their profits on cyclical assets. I, however, see PW as very well aligned. During the past year, PW’s operating cash flows and tangible book value have grown by 1.7x and 4.5x, respectively. This suggests that its intrinsic value is proliferating at a rate of knots. Furthermore, Power REIT holds an RSI of 23.64 and a price to funds from operations of 14.55x, conveying an abundance of value.
Once a favorite of Cathie Wood, Invitae (NYSE:NVTA) is an integrated biosciences company with an emphasis on genetic concepts. NVTA stock hasn’t performed well since the turn of the year, drawing down by 65.4%. Invitae’s RSI of 34.46 tells a tale of bearish herding after the stock started suffering from a slowdown in the growth-stock environment.
Contrary to popular belief, I’m bullish on the stock. Invitae is manifesting solid growth with a 65% year-over-year increase in revenue. It should be noted that Invitae is running at a revenue to research and development ratio of 78.9%, meaning that future monetization of its current expenses could occur. Lastly, the company’s diversified portfolio of offerings in data analysis, cancer research, women’s health, and rare diseases provide it with a large breadth of exposure to niche industries, which remain underserved. I think Invitae stock could be a multi-bagger in the future.
Oversold Stocks to Buy: Shopify (SHOP)
There is no reason for Shopify (NYSE:SHOP) stock to be oversold; it is as simple as that. First of all, Shopify’s penetration of the small to medium-enterprise (SME) market is robust, which could see its “best-in-class” model grow linearly with the domain. Another appealing fact about the company is the velocity at which it is developing new offerings. Shopify’s broad range of revenue streams from segments such as subscriptions, transaction fees, hardware sales, marketplace, applications, and financial services smooths out its topline earnings.
On the date of publication, Steve Booyens did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.