Despite a strong November close, these big, dividend-paying Dow stocks have plenty of leftover upside potential and are safer buys than attractive but more volatile small-cap stocks.
Wednesday’s record gains helped most stocks close near their highs for November, yet the month-end scan of the stocks in the Dow Industrials reveals that many are still far from overbought levels. Many of these large-cap stocks also offer attractive yields.
I use Starc band analysis to identify overbought and oversold conditions. When a market or equity is close to its upper monthly Starc band (Starc+), it is a high-risk time to buy and considered overbought. Conversely, when close to the lower monthly Starc band (Starc-), it is a low-risk time to buy and considered oversold.
In October (see “The Most Oversold Dow Stocks”), Caterpillar Inc. (CAT) was the most oversold stock, as it closed September 30 at $73.84, which was just 0.3% above the monthly Starc- band at $73.64. CAT closed Wednesday at $97.88 and is up over 32% in the past two months.
The table above lists the ten most oversold Dow stocks based on the proximity to their monthly Starc- band as of the end of November. The first stock on the list is Coca-Cola Co. (KO), which is 11% above its monthly Starc- band. While KO is not nearly as oversold as Caterpillar was in October, it would still take a 13% rally to take KO to its monthly Starc+ band....MORE