Not every plunge should be bought, but often beaten up stocks represent overreactions and potential opportunities. For instance, I recently screened the Russell 1000 and found a dozen disasters. While most of those were not something I felt strongly about and a few weren't interesting, one, Constellation Brands (STZ), has soared subsequently as the situation I described has taken a turn for the better.
With smaller stocks, which are more volatile than large ones, there are always lots of beaten up stocks. With the goal of narrowing the universe of 67 stocks in the Russell 2000 trading more than 10% below the 50dma to a more focused list, I ran the additional screen:
- 50dma > 200dma
- 2yr Price Return > S&P 500 (14%)
- 2yr Price Return < 50%
The goal, then, was to find stocks that have performed well and have some technical positives but that have perhaps corrected. Here is what met the criteria:
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