Oversold UK Stocks As FTSE 100 Rises

The FTSE 100 is set for new highs on Friday after strong retail sales data. Some companies have moved strongly in the opposite direction, indicating they could be ripe for a rebound and could follow the market higher.

Notable Oversold UK Companies

• Softcat (SCT), RSI 25.24, market cap £2.23 billion
• Rightmove (RMV), RSI 27.75, market cap £3.27 billion
• IntegraFin Holdings (IHP), RSI 28.29, market cap £1.06 billion

FTSE 100 Records: Who Needs to Catch Up?

The benchmark UK stock index hit a new record this week and is poised to close at an all-time high on Friday if early trends hold. Retail sales data for January were well above expectations, showing that UK shoppers increased their purchases at the highest rate in two years. Consumer stocks like Burberry naturally led to the upside. In the other direction, BP was lower as crude prices fell, reversing the contribution oil companies had made to the FTSE 100's last record high. Despite the benchmark gains, some companies have fallen out of favour with investors over the last few weeks and are trading below the 30 RSI level, suggesting they may be oversold and poised to rebound.

Softcat Suffering From Tech Slump

The UK IT infrastructure company has been trending lower since last summer, but its share price dropped almost 20% in the first few days of February as markets soured on software firms. Traders are worried that AI will make coding so easy that businesses and even consumers will make their own apps, and software providers like Softcat will see a slump in sales. The drop in the share price has left the company with a P/E ratio of 17x, which is quite low for a tech company. Management, however, appears confident in the company's prospects, announcing a £45 million share buyback at the start of the year. Softcat will publish its interim results on March 18, which could serve as a catalyst for investors to regain confidence in the company.

Rightmove Sagging on Poor Housing Market

The listing company's shares have dropped almost 50% from their August highs, as investor optimism for the UK housing market has waned. Rightmove was one of the bright spots in the UK market as the BOE began cutting rates, with traders hoping the UK housing market would accelerate. But high inflation has kept the BOE cautious, and a sluggish market has compounded the challenge, as the economy underperforms. A series of analyst downgrades over the last few months did not help the situation, with Morgan Stanley cutting its price target to 510p. The company's most recent leg down came after activist IFP raised its stake to become the third-largest holder, as investors fret over AI spending plans that will lower the company's bottom line in an already difficult market. Rightmove could address these investor concerns when it publishes its annual results on February 27.

Bottom Line

The UK's Footsie is on track to all-time highs, with several UK companies being oversold and could be due for a rebound as the market continues to rise. Prominent names include Softcat, Rightmove, and IntegraFin Holdings. Softcat stock has seen a decline amid concerns about AI's impact on software sales, but management remains optimistic after the announcement of a share buyback. And Rightmove, affected by a sluggish housing market and recent analyst downgrades, has seen its shares drop nearly 50% since last summer, with results due soon that may help restore investor confidence.