Investors remain infatuated with technology stocks. But most of that growth is being driven by the fear of missing out (FOMO) surrounding artificial intelligence (AI). For sure, AI is going to continue driving the sector but instead of chasing overbought stocks higher, it may be time to look at some oversold tech stocks. To do that you may need to look beyond artificial intelligence.
One of the common technical indicators that traders use to look for oversold stocks is the relative strength indicator (RSI). This is a momentum indicator that offers short-term buy and sell signals. However, there are also fundamental indicators that indicate a stock may be undervalued or oversold.
Here are three oversold tech stocks offering the opportunity for short-term gains now but still make for great long-term investments.
Apple (AAPL)
Apple (NASDAQ:AAPL) is down 5% in 2024 and that’s after the company delivered a double beat in its first quarter earnings report. It seems investors were less than inspired by Apple’s initial foray into AI with its Vision Pro headset. There are also lingering concerns about the direction of the company’s iPhone sales.
Fair enough. I’ll even throw in that at 27.7x forward earnings Apple is far from cheap. But as of the market close on Feb. 20, AAPL stock has an RSI of 35. That’s moving close to being technically oversold.
Buyers should be ready to pounce. If you want to know the reason, just zoom out. Apple has returned 326.16% over the last five years. That’s more than more than four times the 79% growth of the S&P 500 index over that same period. The company is a cash-generating machine with or without the iPhone, which is going to be introducing new AI-enhanced features.
And based on the company’s history, it is likely that the Vision Pro will be the worst version of itself. The device will only get better from here. AAPL stock may not be a great trade but it is still a terrific long-term investment.
Carrier Global (CARR)
Carrier Global (NYSE:CARR) stock is following the market lower and is down 4.3% so far this month. The company delivered a mixed earnings report, slightly beating earnings estimates but offset by just missing on the top line.
However, the bigger story that may heat up CARR stock is the company’s streamlined business. Carrier completed the sale of its commercial refrigeration business to Honeywell (NASDAQ:HON) in December 2023. This was also the last quarter the company will have its global access solutions security business. And the fire sale (pun intended) will continue when Carrier sells its industrial fire business.
What’s left is the company’s high-margin, high-growth residential heating and cooling business. This will be addition by subtraction but that’s not showing up in CARR stock right now. The stock has an RSI of around 42 and has dropped below its 50-day simple moving average. Nevertheless, with the company projecting 9% earnings growth, this is a good stock to buy on the dip.
Generac Holdings (GNRC)
Generac Holdings (NYSE:GNRC) was definitely oversold back in October 2023 as the stock gained 40% from those lows. Yet based purely on an RSI today of 41, it’s not that oversold now. The price action in the last several months, though, shows a lack of conviction from investors. Shares have bounced around between $115 and $120 a stub.
Use that to your advantage. The long-term case for GNRC stock looks strong. The company is projecting a 22% gain in earnings and analysts have a “Moderate Buy” rating on the stock with 16 out of 29 analysts giving it a “Strong Buy” rating.
I recently put Generac on a list of growth stocks to buy and there’s nothing that changes my opinion. The company could certainly use lower interest rates and an improvement in the housing market. And as much as you don’t wish for it, a tropical storm or two would be a reminder of the base case for the company’s products.
On the date of publication, Chris Markoch had a LONG position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
