It can't be a surprise that the entire S&P/TSX Composite is oversold after a 3.8 per cent beating in the five trading sessions ending with Thursday's close. There is, however, evidence that in some cases the baby has been thrown out with the bathwater and opportunities are available for patient investors.
I'm tempted to dig into the energy stocks carnage in search of value. But as a matter of discipline I want to wait until 2015 earnings and cash flow forecasts are public and reflected in stock prices. Analysts haven't been able to slash profit forecasts fast enough to keep up with the collapsing crude price. I'm expecting a big adjustment lower to start the new year if the commodity price stabilizes. I'd rather be a bit late on the rally than too early.
There are 90 stocks trading with Relative Strength Index readings below the buy signal of 30 – too many to post, even online. The table below is a partial list emphasizing either widely held stocks or surprises. I've highlighted 11 companies that looked like interesting candidates for further study.
Manitoba Telecom Services Inc is the focus stock this week, not least because it's mostly out of the way of the commodity carnage. The stock was even more oversold than current levels in October of 2013 but on the whole, the stock price history has been stable at between $25 and $35.
Manitoba Tel has been trending lower and analysts currently expect a decline in earnings growth in the next 12 months. But, the experts also expect a 12 per cent rise in the equity price and that doesn't include a healthy 6.4 per cent indicated dividend yield.
There are only four overbought, technically extended stocks to avoid until the froth burns off a bit; Cogeco Cable Inc., Tim Hortons Inc., Dominion Diamond Corp. and Dollarama Inc.
As always, technical analysis can be extremely helpful but fundamental analysis should be part of the investment process for any buy or sell.
Follow Scott Barlow on Twitter @SBarlow_ROB.
