3 Oversold Stocks Set to Rally

02/02/2016 9:00 am EST


Matt McCall

Founder and President, Penn Financial Group

Three smaller companies that have pulled back to support and have attractive long-term stories have caught the eye of Matt McCall, of Penn Financial Group, so he highlights each and outlines the reasons for why investors may want to consider them.

The correction in the stock market has created eye-popping buying opportunities in individual stocks that have been crushed and are now on sale. Just because a stock has fallen from its high does not necessarily equal a stock that is a good buy. The key is to find a stock that was attractive fundamentally at higher prices and that has been whacked by market-wide selling over the last month.

Three smaller companies that have pulled back to support and have attractive long-term stories that caught my eye are listed below.

Integrated Device Technology (IDTI) designs and manufactures a broad range of high performance semiconductor products and modules. The company’s bottom line growth is expected to increase by nearly 20% annually versus the average of 12% for its peers. The stock trades with an undervalued PEG ratio of 0.88 and forward P/E ratio of 15.3. During the sell-off the stock fell by 20% to the 200-day moving average before bouncing the last few days. The chart and fundamentals point to IDTI hitting a new high in the coming months.

Kite Pharma (KITE) is a niched biotechnology company that is focused on the development of immunotherapy cancer drugs. The company is expected to continue losing money until 2018 when the ten analysts look for earnings per share of $0.74.

That will start the money making for the company that could see earnings per share run to $3.57 by 2019. The stock is down approximately 50% from its all time high and has been a victim of the biotech sell-off. That being said, the stock has a triple bottom support line at the $44 area. If KITE can hold support it could be a great setup for a rally.

Integrated LifeSciences Holdings (IART) is a world leader in regenerative medicine as it develops and markets cost-effective surgical implants and medical instruments. The stock has held up fairly well all things considered and has started to build a base at the $60 area after a garden variety 12% pullback from an all time high. Earnings are expected to increase from $3.11 in 2015 to as high as $5.08 by 2019. The stock is another combination of attractive fundamentals and technicals.

Matt McCall, Founder and President, Penn Financial Group

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