Oversold Stock of the Day: Kimberly Clark (KMB)
Consumer goods company Kimberly Clark (KMB) tumbled last week as the company missed earnings estimates. The drop was enough to send shares down to the point where the company now looks oversold and due for a rally.
Although the company’s earnings failed to impress analysts, the company continues to perform well operationally. Sales rose year-over-year. The company is a manufacturer of products such as toilet paper and paper towels, which have seen strong demand amidst shortages this year.
The recent selloff has now taken shares down about 15 percent from their recent high. Shares are now trading about flat over the past year. Shares have hit an oversold technical level as measured by RSI, or the relative strength index, with a recent reading just under 28. As shares gapped down on earnings, they will likely trend higher to close the gap in the coming weeks and months.
Action to take: The April 2021 $150 calls, which have a bid/ask spread around $3.25, are a solid bet here. The strike price is near where shares traded before the earnings-related selloff.
Traders can likely pick up a mid-to-high double-digit gain on this trade well before the time premium decay picks up.
Investors interested in a defensive consumer goods company may also be interested in shares at current prices. The company trades at 17 times earnings and pays a 3.1 percent dividend.