As we transition into the new year, investors are closely monitoring stock performance following a strong run in 2024. The S&P 500 managed to record consecutive gains exceeding 20% for two years, showcasing a robust market sentiment. However, the last days of 2024 revealed a different narrative, as major U.S. indexes concluded trading on a downward trajectory. This unexpected dip coincided with the absence of the traditionally anticipated “Santa Claus rally,” leading to some concern among market participants.
Recently, the broader index broke its five-day losing streak, but it remained weak for the week overall, marking its third negative week in four. Such a trend prompts investors to search for opportunities among what may be considered oversold stocks—those that have experienced significant declines but possess potential for recovery.
To identify potential rebound candidates, the Relative Strength Index (RSI) serves as a valuable tool. This technical indicator assesses the velocity and magnitude of recent price movements to determine whether a stock is overbought or oversold. Stocks that register a 14-day RSI below 30 are generally interpreted to be oversold, presenting investors with a potential buying opportunity as the market may overreact to negative news.
Utilizing CNBC Pro’s screening tool, several stocks have emerged as candidates for a possible bounce back. Among these, HCA Holdings and Molson Coors Beverage stand out due to their significant RSI figures, implying that they could be ripe for recovery.
HCA Holdings, a major player in the healthcare sector, currently shows an RSI of 22.4, indicating it is well into oversold territory. Many investors turned negative on the stock following the election of President Donald Trump, who is viewed as likely to push for changes to healthcare policies that could jeopardize Medicare and Affordable Care Act subsidies. Despite these concerns, analysts maintain a consensus buy rating on HCA, with projected price targets suggesting a potential upside of nearly 37%.
Despite a recent decline of approximately 9% in the last month, the market’s reaction may be overly pessimistic. The healthcare sector, especially hospital chains reliant on government programs, often sees volatility during political shifts. Thus, the long-term outlook remains positive for HCA Holdings, particularly if the new administration takes a less aggressive stance than anticipated.
Another stock on the oversold list is Molson Coors Beverage, which currently sits with an RSI of 23.5. The stock has faced challenges as public health warnings regarding alcohol consumption emerged, potentially impacting sales. Financial analysts remain cautiously optimistic about Molson Coors, maintaining a “hold” rating while identifying an average upside of over 13%.
In early December, Bank of America’s analyst Brian Spillane raised his price target for the beverage giant, suggesting a more favorable environment for beer sales in 2025. He believes that the prior downturn in sales may lead to a normalization in demand, further reinforcing the company’s potential for recovery. With a notable 10% decline over the past month, a rebound could be on the horizon.
The steel manufacturing sector, represented by companies like Nucor and Steel Dynamics, also deserves attention. These firms have experienced substantial setbacks due to lower demand within the manufacturing and construction industries, coupled with inflationary pressures from imported steel products. As a result, these stocks exhibit characteristics of being oversold, making them attractive to bargain hunters.
However, the outlook for recovery in this sector hinges on broader economic conditions. If construction and manufacturing output rebounds in 2025, these steelmakers could see a swift recovery in their stock prices. Consequently, investors should keep an eye on both the overall economy and sector-specific developments to grasp when the timing is right for investment.
As the market navigates through fluctuations, identifying oversold stocks can uncover opportunities for investors seeking growth. Firms like HCA Holdings and Molson Coors Beverage illustrate how negative market sentiment may not always correlate with a company’s long-term potential. Similarly, steel production companies could present a compelling case for recovery if economic conditions shift favorably.
Investors should remain diligent in analyzing market signals, utilizing tools like the RSI as a guide, while maintaining a focus on upcoming economic trends and sector performance. With the right approach, these oversold stocks might transform from cautionary tales into success stories in the coming months.