There haven’t been many great buying opportunities of late on the markets. But with stock prices starting to fall this month, there are a couple of intriguing options out there.
One way to find possible deals is to look for stocks that are oversold and when their prices have fallen sharply. One way to do this is by using a technical indicator called the Relative Strength Index (RSI). RSI, in a nutshell, looks at a stock’s gains and losses, typically over the past 14 trading days. And when the losses are greater than the gains, the RSI number falls (it operates on a scale of 0-100). And when the RSI value falls below 30, that signals to investors that the stock is oversold.
These two stocks listed here fall into that category.
Suncor
Shares of energy giant Suncor Energy (TSX: SU)(NYSE: SU) are down more than 20% in just the past month. That’s sent its RSI level down below 25:
While it’s still not near its 52-week low of $14.02, you have to go back to March, when the markets were crashing, to the last time that Suncor stock was this low. One of the reasons that investors are worried about Suncor right now is that there’s been a fire at its Fort McMurray base plant that’s impacted production. Production levels are currently restricted, and the company estimates that it won’t be until the middle of Q4 as to when it will be able to achieve its full mining rates.
That’s definitely bad news in the short term for Suncor, but the company says that the majority of its repair costs will be covered by insurance. The company is using this opportunity to work on maintenance and continues to work on bringing its costs down.
Over the long term, there’s no reason to be concerned about Suncor, and buying at a time like this can be advantageous for investors by locking in a low price for one of Canada’s top stocks.
Real Matters
There hasn’t been any problematic news coming out from Real Matters (TSX: REAL) to warrant a big selloff. The stock is also down over 20% over the same period but for different reasons. General bearishness on tech stocks of late has seen many valuations come down simply because prices have gotten so expensive this year. Real Matters, for instance, is still up over 90% this year, even when factoring in its recent decline.
It’s coming off a strong quarter where sales of $118.1 million were up 29% year over year. Real is not your typical tech stock, as it focuses on the insurance and mortgage industries and helping them with appraisals and inspections. The problem is that at a price-to-earnings multiple of over 40, its stock isn’t cheap. And the bearishness in the markets has also sent its stock to an RSI comparable to Suncor’s:
Although its share price hasn’t been this low since June, this is a stock that I’d be a bit more hesitant on. It’s still at a rich valuation and without a strong outlook for the economy, it’s hard to be too bullish on the real estate industry right now.
