MENU

3 Blue-Chip Stocks That Are Oversold and Great Buys Today

When a stock becomes oversold, it could present an opportunity to score a great bargain. While it may be a risky endeavour, especially if a further decline could be around the corner, when the sell-off includes a blue-chip stock that has solid fundamentals, it could be a rare chance to get in on a quality stock at a low price. Below are three stocks that would be great buys even without a dip in price.

Canadian Imperial Bank of Commerce  (TSX:CM)(NYSE:CM) has declined more than 6% in the last month, and that’s pushed its already strong yield up to 4.5%.

A favourite indicator of mine, the Relative Strength Index (RSI), can help to determine when a stock has seen excessive selling, which can also suggest that a reversal could happen soon. When the RSI dips below 30, it signifies a stock is oversold, whereas a value over 70 indicates the opposite.

Recently, CIBC’s stock dropped to an RSI level under 20, and that is a very rare occurrence, as the stock has only briefly gone into oversold territory in the past 12 months. In 2017, CIBC had a rough ride for most of the year, and it wasn’t until September that the stock mounted a rally where it would go on to reach its recent highs.

Bank stocks have typically performed better than the TSX and offer more stability in the long term, so I would expect the stock to see a recovery soon.

Bank of Montreal  (TSX:BMO)(NYSE:BMO) is another bank stock to make this list, as its RSI level recently hit 21. Although it’s not as low of a level as CIBC, investors should note that the last time BMO’s stock was oversold was back in September, when the share closed at less than $90. Investors that bought at that low would have been rewarded with significant returns.

BMO doesn’t pay as high of a dividend as CIBC, but at 3.8% it’s still a strong payout that will continue to grow over the years.

Back in November, the stock also made a “golden cross” where its 50-day moving average moved above its 200-day average, which is a very bullish trend that signifies a stock is on its way up.

Brookfield Asset Management Inc.  (TSX:BAM.A)(NYSE:BAM) is down more than 10% in the past month, and at under $49, it is the lowest the stock has closed at since September. An RSI level of just over 20 also indicates this stock has seen a big sell-off lately, and it too could but due for a reversal soon.

September was the last time the shares dipped under an RSI of 30. At the time, the stock was ~$47 and would go on an incline, reaching a peak of over $57 before dropping back down. Although there’s no guarantee that will happen again, the stock has seen fairly strong support at $50, and so there’s reason to see some upside from where it is trading at now.

Although the stock’s 1.5% yield may not attract much attention from investors looking for a strong dividend, Brookfield offers a great opportunity for capital appreciation over the long term, as the stock has doubled in the past five years.

Canada's answer to Amazon.com

You've probably never even heard of this up-and-coming e-commerce powerhouse headquartered in Eastern Ontario...

But, despite coming public just last year, it's already helping the likes of Budweiser... Tesla... Subway... and Red Bull move $9.9 BILLION (and counting) worth of goods online each year.

And now it's caught the eye of the legendary investor who got behind Amazon.com in 1997 -- just before it shot up over 23,000% and made investors like you and me rich beyond their wildest dreams.

Click here to discover why this investor says it's time to buy.

Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.

Just Released!

Motley Fool CEO Tom Gardner Goes Live and Tells Hong Kong Investors To Buy This Canadian Darling Tech Stock…

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.