In 2024, investors are still wrestling with uncertainty. Will there be rate cuts, and what will they mean for inflation? And no matter what your political disposition, the outcome for public policy is uncertain.
It's important to have rules and guidelines to fall back on at times like this. One commonly used technical indicator is the Relative Strength Index (RSI). This metric measures a stock's momentum and helps investors understand when a stock may be undervalued or overvalued. A reading of around 30 or below indicates that a stock may be oversold.
MarketBeat provides two free tools that investors can use to find oversold stocks using the RSI. One way is to look at the list of Top Oversold Stocks. This generates a list of stocks that have hit an RSI of 30 in the last 30 days. Another option is to use our Stock Screener tool and filter for stocks that currently trade at a specific RSI that you select.
In this special presentation, we use a combination of those features to find seven oversold stocks that have the potential to rally sharply in the back half of the year.
Quick Links
- Eli Lilly
- Microsoft
- Freeport-McMoRan
- Cameco Corporation
- Costco
- Procter & Gamble
- Netflix
#1 - Eli Lilly (NYSE:LLY)
The emergence of GLP-1 therapeutics has caused a surge into weight loss stocks such as Eli Lilly and Co. (NYSE: LLY). The company has GLP-1 candidates Mounjaro for Type-2 diabetes and Zepbound for obesity.
Eli Lilly is currently working to expand Zepbound's label to include sleep apnea, which would potentially add about 80 million patients in the United States alone.
Lilly’s financials show that there’s more to this story than hype. Year-over-year (YOY) revenue was up 19% in 2023. And the company reported a 26% YOY increase in the first quarter of 2024.
But with LLY stock up more than 73% in the last 12 months, investors may believe that the growth is fully priced in. The stock is down 12% in July, which could create a nice entry point for investors. Lilly reports earnings on August 8. A report that supports analysts' outlook for 40% earnings growth could make this a buyable dip.
About Eli Lilly and Company
Eli Lilly and Company discovers, develops, and markets human pharmaceuticals worldwide. The company offers Basaglar, Humalog, Humalog Mix 75/25, Humalog U-100, Humalog U-200, Humalog Mix 50/50, insulin lispro, insulin lispro protamine, insulin lispro mix 75/25, Humulin, Humulin 70/30, Humulin N, Humulin R, and Humulin U-500 for diabetes; Jardiance, Mounjaro, and Trulicity for type 2 diabetes; and Zepbound for obesity.
Read More - Current Price
- $767.76
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 17 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $1,002.22 (30.5% Upside)
#2 - Microsoft (NASDAQ:MSFT)
You’ll have to act quickly, but as of July 31, 2024, Microsoft Corp. (NASDAQ: MSFT) is flashing a rare oversold signal. The reason comes from the company’s earnings report, which it delivered on July 30. The company beat on the top and bottom lines, and the numbers are higher YOY.
But the tech giant guided to slightly lower cloud revenue for the remainder of 2024 and that was enough to get some investors to take profits on MSFT stock, which hit a 52-week high around $467 earlier in July. However, like many technology stocks, Microsoft stock was trending lower before earnings, suggesting some profit-taking was going on.
The Microsoft analyst forecasts on MarketBeat show some price targets being raised and some being lowered. But the new price targets are all higher than the consensus price target, which suggests that this dip in MSFT stock will only be temporary.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $436.60
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 26 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $508.46 (16.5% Upside)
#3 - Freeport-McMoRan (NYSE:FCX)
Mining stocks like Freeport-McMoRan Inc. (NYSE: FCX) can make for tricky investments. The company’s fortunes are intricately tied to the performance of the underlying commodity. One way to mitigate that risk is to buy best-in-class companies such as Freeport-McMoRan.
The catalyst for this miner is that demand for copper is expected to increase for the rest of the decade. This trend was supposed to have started in 2023, but it didn’t really show up in the company’s revenue. That looks to be changing in 2024, and that’s bullish for Freeport-McMoRan, which produced over one billion pounds of copper in its most recent quarter.
Prior to the company’s earnings report on July 23, FCX stock was down about 15% from its recent peak. After a double beat, analysts are confirming their bullish ratings and price targets for the stock which has confirmed a level of support. And with an RSI of around 40, there looks to be solid upside ahead.
About Freeport-McMoRan
Freeport-McMoRan Inc engages in the mining of mineral properties in North America, South America, and Indonesia. It primarily explores for copper, gold, molybdenum, silver, and other metals. The company's assets include the Grasberg minerals district in Indonesia; Morenci, Bagdad, Safford, Sierrita, and Miami in Arizona; Chino and Tyrone in New Mexico; and Henderson and Climax in Colorado, North America, as well as Cerro Verde in Peru and El Abra in Chile.
Read More - Current Price
- $38.86
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $53.92 (38.7% Upside)
#4 - Cameco Corporation (NYSE:CCJ)
Another commodity-related stock flashing oversold signals is Cameco Corporation (NYSE: CCJ). This is the world’s leading uranium miner and demand for uranium is expected to grow rapidly as nuclear power continues to gain acceptance. While some may believe that the future price of uranium will depend on who holds the Oval Office in 2025, it’s not likely to matter at all.
CCJ stock is down about 9% from its all-time highs set in early May. For some investors, this was a time to take some profits and make room for higher highs.
But why is the stock showing signs of being oversold now? Cameco missed on both revenue and earnings in its second-quarter earnings report on July 31. However, both numbers were significantly higher on a YOY basis.
Analysts haven’t weighed in on Cameco’s earnings yet. However, the stock already has a consensus price target of $59.50, which is 34% higher than the price heading into earnings.
About Cameco
Cameco Corporation provides uranium for the generation of electricity. It operates through Uranium, Fuel Services, Westinghouse segments. The Uranium segment is involved in the exploration for, mining, and milling, purchase, and sale of uranium concentrate. The Fuel Services segment engages in the refining, conversion, and fabrication of uranium concentrate, as well as the purchase and sale of conversion services.
Read More - Current Price
- $52.44
- Consensus Rating
- Buy
- Ratings Breakdown
- 7 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $66.56 (26.9% Upside)
#5 - Costco (NASDAQ:COST)
Another one of the year’s best-performing stocks is also offering a buy-the-dip opportunity. Costco Wholesale Corporation (NASDAQ: COST) recently announced that it would raise its membership fees for the first time in about eight years. The new rates will take effect on September 1, 2024.
This looks like a case where investors bought the rumor and sold the news. COST stock surged to a 52-week high prior to the announcement, and now it is down about 4% in the last month. That’s not a huge dip to buy, and there won’t be a lot of news from the company until it reports earnings in late September.
At that time, investors will likely get their first hint at how well members tolerate the new rate. However, historically, the company has had a retention rate of over 90% when it has increased its rates. The revenue the company earns from these price increases goes straight to the bottom line, which should promote a second-half surge.
About Costco Wholesale
Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. The company offers branded and private-label products in a range of merchandise categories.
Read More - Current Price
- $954.07
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $1,011.74 (6.0% Upside)
#6 - Procter & Gamble (NYSE:PG)
Lower interest rates are expected to lift consumer staples stocks. However, a stock like Procter & Gamble Inc. (NYSE: PG) has two concerns. First, the company is losing pricing power as consumers have hit their limit. Second, there’s increasing evidence that consumers are turning to private-label brands (i.e., house brands).
PG stock is up slightly over 9% in 2024, but it has been trading in a defined range since the middle of May. This is good for traders who have solid entry and exit points. But it’s not great news for investors who are looking for a strong total return from P&G.
The recent earnings report won’t help matters. On July 30, Procter & Gamble delivered a split report with revenue missing analysts’ expectations and coming in lower YOY. A single rate cut won’t change the company’s fundamentals dramatically, but any shift in consumer sentiment is likely to be bullish for P&G.
About Procter & Gamble
The Procter & Gamble Company engages in the provision of branded consumer packaged goods worldwide. The company operates through five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The Beauty segment offers conditioners, shampoos, styling aids, and treatments under the Head & Shoulders, Herbal Essences, Pantene, and Rejoice brands; and antiperspirants and deodorants, personal cleansing, and skin care products under the Olay, Old Spice, Safeguard, Secret, SK-II, and Native brands.
Read More - Current Price
- $168.06
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 16 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $180.45 (7.4% Upside)
#7 - Netflix (NASDAQ:NFLX)
Netflix Inc. (NASDAQ: NFLX) has been one of the best-performing stocks in 2023 and 2024. Since bottoming out around $177 per share in early 2023, NFLX stock is up approximately 250%. The company has managed to achieve that by its ability to crack down on password sharing without losing customers. That has led to an increase in subscribers to its low-price, ad-supported tier.
The stock scored a double beat on earnings in mid-July and analysts are bidding the stock higher. But NFLX stock is down about 6.5% in July and is now slightly oversold. The concern is that the easy growth is gone, and it will be tougher to continue growing revenue and earnings at the rate of the last 12 to 18 months.
Or can it? After months of being demure about its interest in live sports, Netflix is hosting its “Drive to Survive” live golf event and also announced a $5 billion deal with WWE. However, more than a few heads turned when the NFL announced it would be streaming two games on Christmas Day exclusively on Netflix.
About Netflix
Netflix, Inc provides entertainment services. It offers TV series, documentaries, feature films, and games across various genres and languages. The company also provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, TV set-top boxes, and mobile devices.
Read More - Current Price
- $909.05
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $807.70 (11.1% Downside)
Even patient investors must feel like the news is moving faster than our ability to keep up. Buy-and-hold is likely to be a good strategy over time, but it's been a tough way to invest in the past couple of years.
Depending on their timeframe and risk tolerance, many investors seek short-term growth independent of their long-term holdings. But even with this strategy, buy low and sell high remains a sound strategy.
The RSI is a tool that provides one data point for investors to use. However, it's a fast-moving indicator that only captures a moment in time. With the proliferation of high-speed trading, many quality stocks get snapped up quickly when they hit a key momentum indicator.
But as this presentation shows, it's important to understand why a stock may be experiencing heavy selling. There are times when there is a good reason that a stock is oversold. That means even if it bounces higher, it could be better to stay away.
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