Investor Fear Just Got “Extreme.” These Oversold Stocks Might Be Due for a Sharp Rebound

The Fear and Greed Index is worth checking in on at moments like this, when the S&P 500 is on the verge of a correction. The Index, which makes use of a number of different technical indicators, is a pretty good way to gauge the main emotion of investors. And right now, that emotion is undeniably “fear.” In fact, it’s “extreme fear, with the figure currently sitting at 17 out of 100 (lower means more fear; higher means more greed).

As the timeless Warren Buffett saying goes, investors should be “greedy when others are fearful.” Of course, it’s hard to be a buyer of stocks when you’re paralyzed with fear. That said, buying at such extremely oversold levels, I think, could be a wise move, even if the uncertainties (especially on the geopolitical front) couldn’t be greater.

The VIX is higher, so is safe-haven demand, and, of course, volatility has been quite tough to grapple with. Just about every technical indicator that goes into the CNN Fear and Greed Index signals “fear” or “extreme fear.” And that might mean taking the opposite side of the trade might be a wise idea, even if it’s a recipe for a big shot to the chin in the near term. In this piece, we’ll look at two names in Microsoft (NASDAQ:MSFT | MSFT Price Prediction) and Oracle (NYSE:ORCL) that might be overdue for a bounce.

Microsoft

Can we really consider Microsoft magnificent any longer? The stock got slapped when the so-called SaaS-pocalypse sell-off hit software and many other AI stocks in the market just a few weeks ago. With Iran fears rising, things don’t seem to be getting any better for the $2.8 trillion enterprise giant. It’s revisiting fresh year-to-date lows and could be at risk of hitting 52-week lows not seen since last April.

Now down 30%, Microsoft stock is unloved, but the 20.4 times forward price-to-earnings (P/E) multiple is a low point when it comes to the price of admission to the big AI beneficiary. While the technicals do not look good as the entire market rolls over into quarter’s end, I do think long-term value investors have plenty of reason to catch this blue-chip falling knife. Azure is still growing quickly, even if capacity issues hold back some of that growth.

Add the Copilot and AI team changes (I view them as improvements) into the equation, and I think it’s quite absurd to have such an AI leader to be going for such a steep historical discount. It’s been many years since Microsoft stock has been this affordably priced, and it might be many years until it’s marked down this severely again. 

Oracle

There’s oversold, extremely oversold, and then there’s Oracle, which is beyond oversold at this point, now down around 55% from its all-time highs.

It’s looking like the stock’s chances of bouncing back above $300 are getting slimmer by the day. And while it’s easy to be a seller, I’d actually consider stepping in as a hero at these depths. For one, some smart hedge funds bought up the stock last quarter at higher prices. Who knows if they’ve stuck around or have added to their positions? We can only speculate for now.

Either way, the potential value in the name is significant, especially if you’re a bull on AI data centers. With Muzuho Securities noting that concerns are “easing,” perhaps it’s time to get back into the waters, even if you’re not so sure that it’s safe.

The legacy software company is turning into an AI infrastructure kingpin. And for that reason, I view the name more as a misunderstood growth pivoter that’s being marked down just because stocks, especially tech stocks, are out of favor. At 19.4 times forward P/E, the multiple is getting ridiculous.