Rebound Ideas: Top 6 Oversold Stocks With Insider Buying

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If you think the current market weakness presents an opportunity to buy stocks on the cheap, you might be interested in the following list.

To create this list, we started with a universe of about 200 oversold stocks, as determined by the Relative Strength Index, or RSI(14), indicator.

The Relative Strength Index measures the speed and change of price movements. It is often used as a momentum indicator, with a reading that ranges from 0 to 100.

In general: RSI(14) above 70 signal the stocks are overbought (i.e., prices might soon decline), and RSI(14) below 30 signal the stocks are oversold (i.e., prices might soon rebound).

Of course, RSI(14) is just one technical indicator, and it should never be used in isolation. It's often recommended to look for other fundamental factors that could signal a turnaround in the stock's price.

To supplement the information of the RSI(14) indicator, it could be useful to look at the trades of company insiders.

Insiders work for the company in question and their investment activity is closely monitored. Insiders usually have access to more information than other investors, and their investment activity in the company can tell us a lot about where they feel the business is heading.

Companies experiencing insider buying over the past six months provide an indicator that insiders think the stock is undervalued at current levels.

Of course, insiders often get it wrong. So be careful, and only use this list as a starting point for your own analysis.

Insider executives think these stocks are oversold, and technical indicators seem to support their view. What do you think? (Click here to access free, interactive tools to analyze these ideas.)

1. Ardea Biosciences (NAS: RDEA) : Drug Manufacturer. RSI(14) at 25.92. Over the last six months, insiders have been net buyers of 495,549 shares, which represents about 2.17% of the company's float of 22.88M shares. The stock has returned -22.76% over the last year.

2. Overseas Shipholding Group (NYS: OSG) : Shipping Industry. RSI(14) at 29.38. Over the last six months, insiders have been net buyers of 73,682 shares, which represents about 0.29% of the company's float of 25.34M shares. The stock has returned -49.13% over the last year.

3. Aeroflex Holding Corp. (NYS: ARX) : Semiconductor Industry. RSI(14) at 20.32. Over the last six months, insiders have been net buyers of 23,795 shares, which represents about 0.12% of the company's float of 19.72M shares. The stock has returned 0.% over the last year.

4. Amkor Technology (NAS: AMKR) : Semiconductor Industry. RSI(14) at 29.64. Over the last six months, insiders have been net buyers of 17,500 shares, which represents about 0.02% of the company's float of 95.22M shares. The stock has returned -26.28% over the last year.

5. Education Management (NAS: EDMC) : Education & Training Services Industry. RSI(14) at 21.88. Over the last six months, insiders have been net buyers of 7,500 shares, which represents about 0.01% of the company's float of 80.71M shares. The stock has returned 81.39% over the last year.

6. PulteGroup (NYS: PHM) : Residential Construction Industry. RSI(14) at 27.1. Over the last six months, insiders have been net buyers of 50,000 shares, which represents about 0.01% of the company's float of 336.34M shares. The stock has returned -53.47% over the last year.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Eben Esterhuizen does not own any of the shares mentioned above.

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