The Relative Strength Index (RSI) is a tool that compares recent transactions of a stock to gauge the stock price’s strength. It tells investors whether a stock has been oversold, making it likely that it is undervalued, or overbought, meaning that it could be trading at a premium on momentum. Oversold stocks have RSI’s under 40 – the lower the RSI, the more oversold the stock – whereas overbought stocks have higher RSI’s (over 60) and the higher the RSI, the more overbought the stock. Investors can maximize the timing of a stock transaction using this tool.
The companies on this list are priced have high RSIs (over 70) and high P/E ratios, indicating that they are overbought and priced to sell:
Weyerhaeuser Co. (WY) is an industrial real estate investment trust (REIT) with a $10.85 billion market cap. The company is currently priced at 47.02 times its forward earnings and has an RSI of 74.30. WY recently traded at $20.22 a share. It has a one year target estimate of just $19.47, although some analysts say the stock could sink as low as $16 a share in the next 12 months. Israel Englander’s Millennium Management recently sold out of its position in WY.
Fastenal Company (FAST) is a general building materials company with a $13.75 billion market cap. The company is currently priced at 32.35 times its forward earnings and has an RSI of 73.38. FAST recently traded at $46.59 a share. Analysts say this stock could go as low as $33 a share in the next year. UBS downgraded FAST from buy to neutral on December 7. Jeffrey Vinik’s Vinik Asset Management sold out of its position in FAST recently.
Chipotle Mexican Grill, Inc. (CMG) is a fast food chain with a $11.10 billion market cap. The company is currently priced at 41.00 times its forward earnings and has an RSI of 64.47. CMG recently traded at $354.62 a share. Analyst opinion is highly divided on this stock. Deutsche Bank upgraded it to buy on January 3 and Miller Tabak upgraded it from sell to hold on November 10, but some analysts forecast the stock will sink to $244 a share in the next year. David E. Shaw’s D E Shaw is amongst the funds that sold out of positions in CMG lately.
Goodrich Corp. (GR) is an aerospace and defense company with a $15.53 billion market cap. The company is currently priced at 18.06 times its forward earnings and has an RSI of 64.16. GR recently traded at $124.05 a share. Analysts say GR could sink as low as $79 in the next year. The company has had three downgrades in as many months. Recently, several hedge funds sold out of positions in GR, including Lee Ainslie’s Maverick Capital.
Paychex, Inc. (PAYX) is a staffing and outsourcing services company with a $11.23 billion market cap. The company is currently priced at 19.01 times its forward earnings and has an RSI of 62.90. PAYX recently traded at $30.99 a share, above its mean one year target estimate of $30.23. Analysts predict the stock could fall as low as $26 a share in the next 12 months. Ray Dalio’s Bridewater Associates sold its stake in PAYX recently.
Public Storage (PSA) is a diversified real estate investment trust (REIT) with a $23.08 billion market cap. The company is currently priced at 35.14 times its forward earnings and has an RSI of 61.04. PSA recently traded at $134.94 a share. Analysts give this company a mean one year target estimate of $124.94 a share, but some say it could trade as low as $103 a year from now. Jim Simons’ Renaissance Technologies recently sold a large chunk of its holding in PSA.
Vornado Realty Trust (VNO) is a diversified real estate investment trust (REIT) with a $23.08 billion market cap. The company is currently priced at 25.51 times its forward earnings and has an RSI of 60.40. VNO recently traded at $79.34 a share. Analysts say VNO could fall as low as $68 in the next year. Jim Simons’ Renaissance Technologies sold out of VNO lately.
