The market tends to overreact to corporate financial results, leading many analysts on Wall Street to dub quarterly earnings reports the “silly season.” Many stocks rise or fall by 20% or more immediately after their quarterly prints are made public.
These gyrations can lead to many great stocks becoming oversold. This has certainly been the case for many of the 30 stocks that comprise the Dow Jones Industrial Average, otherwise known as oversold Dow stocks.
Several leading blue-chip names are sitting at or near 52-week lows as we come to the end of the second-quarter earnings, and look extremely oversold and undervalued at current levels. A general downturn in the stock market during August and other factors are also leading to many quality stocks becoming oversold.
This situation offers a huge opportunity for investors to capitalize on with the ability to buy quality stocks at low prices and ride them to big gains when they eventually reverse course and trade higher. Here are three very oversold Dow stocks to buy right now.
Nike (NKE)
Sneaker and athletic apparel giant Nike (NYSE:NKE) can’t seem to gain any traction. Down 17% year to date, NKE stock is currently on a record losing streak, having posted 10 consecutive days of trading losses, its longest run on record. Shares of Nike are now trading below $100. Sentiment towards the retailer soured in late June when it reported its first earnings miss in three years due to lower profit margins and stagnant inventories.
More recently, a spate of poor earnings from other retailers that sell its products, notably Foot Locker (NYSE:FL) and Dick’s Sporting Goods (NYSE:DKS), have led to the August decline in NKE stock.
Add in an economic downturn in China, Nike’s second-largest market globally, and you have the makings of a serious slide in the shoemaker’s stock. If there’s a silver lining to be found, it’s that investors can buy the stock of Nike at a rock bottom price right now. Long-term, shares of the largest sneaker company in the world should reverse higher.
The median price target on NKE stock is currently 33% higher than where the shares are currently trading.
Goldman Sachs (GS)
Dow component Goldman Sachs (NYSE:GS) is also on a losing streak, with its stock having declined for seven consecutive days in August, bringing its year-to-date loss to nearly 10%. It seems all news related to the investment bank has been negative lately.
Goldman CEO David Solomon has been the subject of multiple critical media profiles, including in The New York Times newspaper. The articles claim that Solomon’s aggressive management style has created a corrosive work environment at the bank.
More importantly for investors, Goldman Sachs has struggled as the mergers and acquisitions and initial public offerings that are its bread-and-butter remain anemic on Wall Street. An attempt to diversify into consumer banking failed miserably, creating further financial issues at the investment bank.
Goldman Sachs just announced plans to sell part of its wealth management business as it moves to focus on serving ultra-rich clients going forward. The median price target on GS stock is 21% higher than where the stock is currently sitting. This stock easily earns its spot on our list of oversold Dow stocks to buy.
Apple (AAPL)
According to research analysts at Morgan Stanley (NYSE:MS), consumer electronics giant Apple (AAPL) is now the most under-owned large-cap tech stock in the United States.
That news comes as AAPL stock declined nearly 10% after a Q2 earnings report that showed sales of its marquee products such as the iPhone and Mac computer continue to deteriorate worldwide. With the share price currently down 7% over the last month, now would be an opportune time for investors to take a position.
While sales of Apple’s hardware products may be on the decline, the company’s services, which include its app store and Apple TV, are roaring ahead and compensating for losses suffered on sales of iPads and other devices.
It was strong sales of Apple’s services that enabled the company to beat Wall Street forecasts for its second-quarter results. Some analysts say Apple’s pivot to services shows foresight on the part of CEO Tim Cook given the inevitable market saturation of products such as the iPhone.
The median price target on AAPL stock among analysts who track the company’s progress is 11% higher then current levels.
— Joel Baglole
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Source: Investor Place