This homebuilding play is one of the most oversold stocks amid this week’s market turmoil
Builders FirstSource emerged as one of the most oversold stocks this week as traders grappled with war in Iran and a sharp surge in oil prices. The major averages fell this week, weighed down by escalating tensions in the Middle East, U.S. crude oil prices that topped $90 a barrel and a February jobs report that surprised economists to the downside. The market turmoil pulled the Dow Jones Industrial Average down 3% on the week, while the S & P 500 lost 2%. Certain stocks seemed to be more swept up in the broad market’s sell-off than others. CNBC Pro used its stock screener tool to identify these names based on their 14-day relative strength index, or RSI. Stocks with a 14-day RSI below 30 are considered oversold, meaning that a rebound may be on the horizon. Conversely, a reading above 70 indicates that a stock is overbought and could be due for a potential pullback. The following table shows this week’s most oversold names. Builders FirstSource dropped nearly 11% on the week, ending up with an RSI reading of 22. Shares of the building materials company fell alongside the iShares U.S. Home Construction ETF (ITB) , which tumbled more than 8% week to date. Despite the recent action, RBC Capital Markets upgraded Builders FirstSource to outperform from sector perform on Thursday, pointing to an attractive valuation after a pullback in the stock. “Playing in the trough, margins more defensible than feared,” wrote analyst Mike Dahl. Manufacturer of scales Mettler-Toledo International was the most oversold stock this week, with an RSI of 18. Shares were off more than 11% on the week. Last month, Mettler-Toledo guided for its first-quarter earnings to come in between $8.60 to $8.75 per share, while analysts polled by FactSet had expected $9.01 per share. However, Mettler-Toledo reported a fourth-quarter adjusted earnings and revenue beat, and lifted its adjusted earnings guidance for the fiscal year from its previous forecast. On the other hand, stocks in overbought territory this week included CF Industries and LyondellBasell Industries . Fertilizer company CF Industries made the list of overbought stocks, with an RSI of 78. CF Industries was up about 16% on the week, since fertilizer prices are rising heading into the upcoming planting season. The closing of the Strait of Hormuz could further affect fertilizer prices , since around 15% of global phosphates are produced in the Middle East and shipped out of the Strait, according to Peter Boockvar, chief investment officer of OnePoint BFG Wealth Partners. Similarly, investors have gotten more bullish on chemical manufacturer LyondellBasell Industries, up almost 17% on the week. KeyBanc Capital Markets recently upgraded the stock to overweight from sector weight. “We upgrade DOW and LYB to Overweight as ~11-15% of global ethylene/PE capacity is directly affected by the U.S./Israel conflict with Iran. Additionally, rising crude oil prices steepen the global cost curve benefitting U.S.-based producers,” wrote analyst Aleksey Yefremov. The firm views LyondellBasell as “relatively better” positioned due to fewer assets in the Persian Gulf.
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