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Five Oversold Stocks: One Is a Strong Buy, One Is a Lotto Ticket

NEW YORK ( TheStreet) -- Stocks sell off for many reasons. Among the most common reasons are reallocation of capital by elephants (hedge, pension, and mutual funds), earnings, and emotion.

The latest in-fashion reason to account for the decline in stock prices is the so-called fiscal cliff. I suppose the term fiscal cliff has a better ring to it than simply calling it what it really is -- the end of the party.

When it comes to a fiscal cliff or the end of the party I have good news and I have bad news.

The good news is there is little to make me believe we are about to fall off a cliff like Wile E. Coyote chasing Road Runner right now. Politicians are still able to take the easy way out and we can simply borrow more money to keep the band playing. America's AmEx Black card continues to charge ever-increasing amounts. Because it can borrow more, expect Washington to do so.

The bad news is the cliff is coming, and we will likely wish it was only as bad as falling off a cliff. With Obamacare just around the corner, don't expect a fast-improving economy. Even so, we likely have another five years before the Federal fiscal problem "really" has to be dealt with.

What does this all mean? It means forget about the fiscal cliff for now and focus on things you do have control over. For one, you can select stocks that are beaten up and ready to move higher.

The following are relatively unloved companies that I believe are about to outperform the market. PLCM Revenue Quarterly Chart PLCM Revenue Quarterly data by YCharts

Polycom (PLCM - Get Report)

Background: Polycom provides standards-based unified communications (UC) solutions.

52-Week Range: $7.45 to $22.34

Book Value: $8.03

Price To Book: 1.3

Shares are slowly but steadily climbing in the last 30 days, up 3% since about a month ago. Longer term, the shares have sold off and present a bargain for value seekers. The company is debt-free, earned about 32 cents in the last year, and is expected to see an increase for profit and revenue next year.

Best of all, the shares are on sale, trading about 20% below the 200-day moving average. I believe the moving average will get tested soon. Other than the key moving average, my technical analyst on the chart is bullish.

Seventeen out of 18 analysts are now rendering a hold recommendation. One recommends this as a buy, and no analysts recommend selling.

The average analyst target price for Polycom is $10.46.

The current proportion sold short based on the float is 8.2%, and I find this much interest by short sellers worth looking at in more depth. Short-sellers are the smart money, but they don't always get it right. I think they have it wrong this time.

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SYM TRADE IT LAST %CHG
RSH $0.31 12.76%
DD $78.49 0.00%
PLCM $13.90 0.00%
PMCS $9.75 0.00%
STX $61.56 0.00%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

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