Recent macro-related factors have pushed stocks lower in sectors like tech and finance.
However, when it comes to finding the most undervalued stocks, you may want to consider stocks that have fallen for other reasons.
Namely, you may want to focus on names that have fallen due to the market's overreaction to negative company-specific news.
These stocks have strong rebound potential.
The reasons for this are twofold.
First, even most headwind-laden stocks can reach a price at which their value makes them worth the risk.
Bargain hunters sweep in, and shares begin to recover.
Second, in some cases, a spate of positive news could arrive, leading to a sentiment shift and a subsequent rebound for the stock.
Right now, the following stocks meet these criteria: PayPal Holdings (PYPL 1.25%), Wendy's (WEN 1.06%), and Yelp (YELP +1.59%).
Investors are catching on to PayPal's deep value proposition PayPal Holdings shares experienced a sharp price decline at the start of February.
The release of disappointing results, coupled with the unexpected news that CEO Alex Chriss was stepping down in favor of former HP head Enrique Lores, prompted a bearish reaction from investors.
Chriss' turnaround failed to drive a growth resurgence.
It's unclear what exactly Lores will do get the company back into growth mode.
However, PayPal stock is surging once again due to a possibly emerging catalyst.
Post-plunge, PayPal fell to a forward earnings multiple in the high single digits.
This initially attracted speculation that PayPal could be a takeover target.
Now, there may be....
