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Steve Hach is the Senior Editor at ValuEngine.com, a Melbourne, Florida-based stock valuation and forecast service. ValuEngine utilizes Ivy League financial research as the basis for its coverage of more than 8000 US, Canadian, and other foreign stocks. Hach utilizes ValuEngine's complex... More
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  • ValuEngine Weekly June 10, 2011

     

     

    Go to ValuEngine.com
    June 10, 2011
    Seeking Alpha Readers should check out our Seeking Alpha VE Investment App HERE
      ValuEngine Index Overview
    Index
    Week Open
    Thurs. Close
    Change
    % Change
    YTD
    DJIA
    12151.19 12124.36 -26.83 -0.22% 4.02%
    NASDAQ
    2728.31 2684.87 -43.44 -1.59% 0.72%
    RUSSELL 2000
    808.13 792.64 -15.49 -1.92% 0.64%
    S&P 500
    1300.26 1289 -11.26 -0.87% 1.80%
    ValuEngine Market Overview
    Summary of VE Stock Universe
    Stocks Undervalued
    57.65%
    Stocks Overvalued
    42.35%
    Stocks Undervalued by 20%
    24.68%
    Stocks Overvalued by 20%
    15.52%

    .

    ValuEngine Sector Overview
    Sector
    Change
    MTD
    YTD
    Valuation
    Last 12-MReturn
    P/E Ratio
    Multi-Sector Conglomerates
    0.49%
    -1.73%
    -0.24%
    18.76% overvalued
    36.67%
    25.01
    Utilities
    0.12%
    -1.51%
    3.51%
    3.86% overvalued
    26.67%
    23.84
    Oils-Energy
    1.01%
    -3.45%
    -1.79%
    2.58% overvalued
    44.39%
    56.27
    Transportation
    0.48%
    -3.64%
    -7.25%
    2.42% overvalued
    20.29%
    19.94
    Consumer Staples
    0.24%
    -2.49%
    -7.86%
    0.14% overvalued
    19.10%
    31.51
    Business Services
    0.90%
    -1.87%
    6.16%
    1.47% undervalued
    19.84%
    26.60
    Aerospace
    0.47%
    -1.69%
    9.88%
    2.79% undervalued
    29.50%
    17.87
    Medical
    0.29%
    -3.22%
    11.43%
    3.24% undervalued
    23.20%
    31.26
    Retail-Wholesale
    1.10%
    -3.11%
    1.65%
    3.37% undervalued
    26.57%
    33.44
    Finance
    0.36%
    -2.04%
    -0.67%
    3.53% undervalued
    12.91%
    27.57
    Consumer Discretionary
    0.63%
    -3.77%
    -0.39%
    3.72% undervalued
    18.23%
    29.67
    Computer and Technology
    0.40%
    -4.03%
    4.21%
    4.48% undervalued
    36.96%
    37.59
    Industrial Products
    0.84%
    -2.98%
    -2.87%
    6.11% undervalued
    31.30%
    28.03
    Construction
    0.14%
    -5.36%
    -10.44%
    6.47% undervalued
    5.66%
    28.39
    Auto-Tires-Trucks
    0.79%
    -2.89%
    -12.38%
    6.91% undervalued
    47.13%
    18.63
    Basic Materials
    1.39%
    -3.31%
    -8.07%
    8.14% undervalued
    49.02%
    34.39
      Sector Talk--Oil/Energy

      Below, we present the latest data on the Oil/Energy Sector from our Institutional software package (Pending:VEI).  Top five lists are provided for each category.  We applied some basic liquidity criteria--share price greater than $3 and average daily volume in excess of 100k shares. 

    Top-Five Energy Sector Stocks--Short-Term Forecast Returns

    Ticker
    Name
    Mkt Price
    Valuation(%)
    Last 12-M Retn(%)
    EQU
    EQUAL ENERGY
    7.2
    23.83
    17.26
    SD
    SANDRIDGE ENRGY
    10.54
    -34.73
    64.95
    XTXI
    CROSSTEX ENERGY
    11
    -38.67
    83.64
    SPWRA
    SUNPOWER CORP-A
    21.3
    -33.23
    87.34
    LNG
    CHENIERE ENERGY
    9.33
    -48.41
    226.22

    Top-Five Energy Sector Stocks--Long-Term Forecast Returns

    Ticker
    Name
    Mkt Price
    Valuation(%)
    Last 12-M Retn(%)
    EQU
    EQUAL ENERGY
    7.2
    23.83
    17.26
    SD
    SANDRIDGE ENRGY
    10.54
    -34.73
    64.95
    SLB
    SCHLUMBERGER LT
    85.84
    -5.51
    56.67
    PVA
    PENN VIRGINIA
    15.04
    -42.86
    -31.01
    GMXR
    GMX RSRCS INC
    4.88
    -49.16
    -24.81

    Top-Five Energy Sector Stocks--Composite Score

    Ticker
    Name
    Mkt Price
    Valuation(%)
    Last 12-M Retn(%)
    BP
    BP PLC
    44.24
    -22.93
    54.31
    ENB
    ENBRIDGE INC
    31.24
    -43.1
    38.91
    VLO
    VALERO ENERGY
    25.4
    -16.46
    56.69
    SPWRA
    SUNPOWER CORP-A
    21.3
    -33.23
    87.34
    TOT
    TOTAL FINA SA
    56.09
    -14.53
    32.23

    Top-Five Energy Sector Stocks--Most Overvalued

    Ticker
    Name
    Mkt Price
    Valuation(%)
    Last 12-M Retn(%)
    HOS
    HORNBECK OFFSHR
    25.6
    104.84
    100.63
    CVI
    CVR ENERGY INC
    21.03
    103.99
    184.19
    ICO
    INTL COAL GROUP
    14.57
    88.17
    292.72
    FTK
    FLOTEK INDU INC
    8.48
    83.53
    542.42
    HLX
    HELIX EGY SOLUT
    16.01
    78.41
    54.39

    Seeking Alpha Readers should check out our Seeking Alpha VE Investment App HERE

    Free Report Download for Subscribers

    As a bonus to our Free Weekly Newsletter subscribers, we are offering a FREE DOWNLOAD of one of our Detailed Valuation Reports--this report is normally $25.00.  

      This week's free download is our report on Apple Computer (NASDAQ:AAPL). Apple Computer. designs, manufactures and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers.

    Weekly Subscribers can download a FREE Detailed Valuation Report on AAPL HERE.

    If you have not subscribed and want to be able to receive a FREE $ 25.00 Detailed Valuation Report, you can subscribe to our Free Weekly Newsletter HERE

      What's Hot--Market Talk from Brian Brogan

    VE Capital Management's Brian Brogan Talks Bubbles and How to Profit from Them

    Brian Brogan is a portfolio manager and COO for Value Engine Capital Management. He specializing in risk management and technical analysis. Brogan served on both the retail and institutional sides for several leading financial firms including Morgan Stanley Smith Barney, LPL Financial, Revenue Shares ETFs, H.G. Wellington & Co. Inc, PNC Bank, ING America, US Allianz, and Morgan Stanley Dean Witter. Brogan has over 12 years of experience on Wall Street working with some of the largest fund managers in North America. Brian specializes in Behavioral Finance.

      The risk-free trade is the mother’s milk of investing.  In fact, all interest rates and (CAPM) discount models start with the risk-free rate as the foundation of all future returns. However, unless you are a bank able to access the discount widow, you will always confront risk in your investing-- even though you may consider some asset classes "risk free." 

      The development of derivatives theoretically makes it possible to parse market risk and sell it to counter parties for a fee. This is like "heaven" or "having your cake and eating it too!"  But we know now--and should have known all along, that risk is always a factor in investing.  Nassim Taleb tried to warn us in 2007 that these theories do not stand up to real world conditions and that "black swans" will always appear to knock down the latest mania for "risk free" speculation and investing.

      We are currently working under QEII, a monetary policy which promotes easy credit and leads to speculative bubbles and the paradox of the moral hazard trade.   From an objective perspective, one can analyze the recent tech and housing bubbles and see that the root causes for them was easy credit for borrowers and low margin requirements for lenders-- along with the concurrent plague of high leverage.

      Today, many are looking for the proverbial “next shoe to fall."  The easiest way to do this is to find out where risk is being downplayed or hidden.  Once you discover where the risk is being removed from the market, you can spot the latest bubble.

      In 2007, the destruction of the housing market-- with its liar loans, no doc loans, 2/28 ARMs, CDOs, CDSs, and all the other bubble accoutrements-- was a little easier to understand because real estate, at its heart, is an asset class that is tangible and transparent.  But when it comes to understanding other asset classes subject to bubbles-- like Commodities, Fixed Income, and/or derivatives, most investors are lost in translation.

      Indeed, even professionals typically deal in specific asset classes so unless they are a generalist they usually follow a herd mentality when it comes to their own trades. One must understand the risk involved in different asset classes and how they relate to each other in order to navigate through a global market which provides numerous opportunities for bubbles and black swans.

      We are closing in on 2 ½ years of this Bull market and we may not have much further to go, and by the looks of today’s market and new IPOs like Linkedin trading at 30x sales it may be time to look for cover.    In the current investing environment, managers are concerned with non-correlated assets-- an asset class which does not go down when the S&P 500 goes down.  The key to contrarian investing is to start to leave the party just as others are starting to arrive.  The best place is cash, but this doesn’t pay to stay, so do you venture into Bonds for yield?

      The bond market has been on a nice up trend in price since February of this year. This is good news if your Ben Bernanke because the general investor is now doing the heavy lifting for the Fed. But one needs to be concerned over the debt-ceiling debate now on the big screen in Washington. If this spooks the market, you could see a drop in bond prices as the weak hands close out of their short term trade with a gain.  You could see a 6 or 7% handle and a attractive price if this were to happen in the upcoming days and weeks.

      In this sort of environment, I look to the following position:

    • Short S&P 500
    • Cash
    • Looking for Ten-Year Yield Target @2.4%

      If my analysis is correct, this type of position should get you to the end of July-- at which point the debt issue needs to be addressed or the bond market will sell off.

      Q1 2011 FDIC Report

    VE Chief Market Strategist Suttmeier Sees Challenges Ahead for Banking and US Economy

      ValuEngine Chief Market Strategist Richard Suttmeier is an expert on the US Banking System and uses the health of the system as a leading economic indicator.   He distills his thoughts on the banking system in our FDIC Report.  The latest update of the report is now available. 

     

      In his summary of the report he notes the following:

    The FDIC touts fewer bank failures and problem banks, but my statistics show more banks in trouble. The FDIC’s list of “Problem Banks” only grew by four to 888, but like the questionable profit numbers mentioned below, slow growth in the number of problem banks is based on the fact that 56 banks were absorbed by merger and 26 banks failed in the first quarter. I would also argue that the FDIC continues to be slow in closing banks overexposed to Commercial Real Estate loans and thus the next wave of bank failures is delayed rather than avoided.

    Profits are on the rise for the FDIC-insured financial institutions, but a closer look at the data reveals that this is only due to reduced loan-loss provisions. In fact, net operating income for FDIC institutions was lower year-over-year for only the second time in 27 years. Among the ten largest financial institutions, six reported year-over-year declines in net operating revenue, six reported declines in non interest income, and eight reported lower net interest income.

    The “Too Big to Fail’ banks are even bigger; JP Morgan leads with $1.87 trillion in assets. Bank of America is second with $1.69 trillion. Citigroup is third with $1.32 trillion. Wells Fargo is fourth with $1.14 trillion. The top four banks have $6 trillion in assets, which is 45% of the entire pool of assets in the banking system. These banks will be paying higher assessments to the FDIC Deposit Insurance Fund in the months and years ahead.

    The housing market remains a drag on the US economy, and the network of community banks are not fit financially to increased lending to homebuilders and to potential home buyers. Community banks remained saddled by legacy commercial real estate loans made between 2003 and 2007, and our major regulators--The US Treasury, the Federal Reserve and the FDIC-- ignored their own regulatory guidelines.

    Thus we see continued banking and housing woes. This sort of environment caused the 2008 / 2009 recession and I see little improvement. For example, at the end of 2007 there were $164.8 trillion in notional amount of derivatives at FDIC-insured financial institutions. At the end of the Q1 2011, derivatives were significantly higher-- at $246.1 trillion, up 49.3%. De-leveraging should have reduced this total.

    As I have long predicted, we have a confirmed double-dip for housing, and I believe that ongoing problems in the banking system could combine with housing woes to once again drive the US economy into recession.

     

      A critical portion of this report is the ValuEngine List of Problem Banks.  Problem banks are publicly traded FDIC insured financial institutions who are overexposed to Construction & Development Loans and/or Nonfarm nonresidential real estate loans, with “1-Engine”--Strong Sell, or “2-Engine”—Sell.  The report also includes a listing of all other engine-rated banks-- and those with “n/a” ratings but forecast figure data points according to our models-- in violation of FDIC guidelines vis-a-vis loan exposures.

    Our latest ValuEngine FDIC Report is now posted. The report contains loan exposure and/or ValuEngine datapoints on valuation, forecast, and ratings for all of the institutions on our List of Problem Banks. 

    Subscribers can download it HERE.

    Others interested in the report may find out more on our website by clicking the image below.

     

    Seeking Alpha Readers should check out our Seeking Alpha VE Investment App HERE

     

     An archive of this weekly newsletter is available here.

     
     
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    Jun 10 2:37 PM | Link | Comment!
  • Exxon-Mobil (XOM,$XOM) Reports Major Gulf Discovery, ValuEngine.com Rates Energy Giant a Buy
    Go to ValuEngine.com
    June 8, 2011

    Seeking Alpha Readers should check out our Seeking Alpha VE Investment App HERE

    Oil that is, Black Gold, Texas Tea

    Exxon-Mobil (XOM,$XOM) Reports Major Gulf Discovery, ValuEngine.com Rates Energy Giant a Buy

      Another down day for stocks was tempered by news of a major Gulf of Mexico discovery by Exxon-Mobil (NYSE:XOM).  While stocks were down, oil prices rose on news that OPEC has declined to increase production.  With the hot days of Summer upon us, crude over $100/barrel on the New York Mercantile Exchange-- yet again-- could make travel to the shore a more expensive proposition.  The news seems destined to keep major oil producers profits pegged to record levels.

      ValuEngine has issued a BUY recommendation for Exxon-Mobil on Jun. 08, 2011. Based on the information we have gathered and our resulting research, we feel that Exxon-Mobil has the probability to OUTPERFORM average market performance for the next year. The company exhibits ATTRACTIVE company size, volatility and risk.

     Based on available data as of Jun. 08, 2011, we believe that XOM should be trading at $84.83. This makes XOM 5.69% undervalued. Fair Value indicates what we believe the stock should be trading at today if the stock market were perfectly efficient and everything traded at its true worth. For XOM, we base this on actual earnings per share (NYSEARCA:EPS) for the previous four quarters of $7.49, forecasted EPS for the next four quarters of $9.19, and correlations to the 30-year Treasury bond yield of 4.26%.

      Exxon Mobil Corporation's principal business is energy, involving exploration for, and production of, crude oil and natural gas, manufacturing of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. Exxon Mobil is a major manufacturer and marketer of basic petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a wide variety of specialty products. Exxon Mobil is engaged in exploration for, and mining and sale of coal, copper and other minerals.

      Subscribers can check out the latest valuation, forecast, and ratings figures on XOM from our Models HERE. 

    Market Indices Data
    Index
    Latest
    Change
    YTD
    Dow Jones
    12,072.50
    1.70
    4.28%
    NASDAQ Composite
    2,682.17
    -19.39
    1.10%
    Russell 2000
    788.55
    -9.00
    0.63%
    S&P 500
    1,283.25
    -1.69
    2.04%

     

    ValuEngine Market Overview
    Summary of VE Stock Universe
    Stocks Undervalued
    56.47%
    Stocks Overvalued
    43.53%
    Stocks Undervalued by 20%
    23.05%
    Stocks Overvalued by 20%
    16.01%
     
    ValuEngine Sector Overview
    Sector
    Change
    MTD
    YTD
    Valuation
    Last 12-MReturn
    P/E Ratio
    Multi-Sector Conglomerates
    -0.23%
    -1.17%
    0.05%
    14.81% overvalued
    36.73%
    25.05
    Utilities
    0.14%
    -1.27%
    3.69%
    4.45% overvalued
    27.48%
    23.83
    Transportation
    0.00%
    -2.61%
    -6.50%
    4.04% overvalued
    22.10%
    20.18
    Oils-Energy
    0.26%
    -3.22%
    -1.80%
    2.99% overvalued
    44.42%
    56.32
    Consumer Staples
    0.11%
    -1.66%
    -7.28%
    0.95% overvalued
    20.50%
    31.60
    Business Services
    0.66%
    -1.72%
    1.42%
    0.53% undervalued
    20.62%
    26.62
    Medical
    0.07%
    -2.70%
    12.16%
    1.94% undervalued
    22.09%
    31.28
    Aerospace
    0.56%
    -0.12%
    11.90%
    2.06% undervalued
    30.12%
    17.95
    Computer and Technology
    0.11%
    -2.72%
    5.61%
    2.79% undervalued
    37.65%
    37.79
    Finance
    0.20%
    -1.65%
    -0.28%
    2.81% undervalued
    13.00%
    27.65
    Retail-Wholesale
    0.04%
    -2.83%
    2.15%
    2.87% undervalued
    26.21%
    33.55
    Construction
    -0.87%
    -4.63%
    -9.70%
    4.89% undervalued
    6.79%
    29.05
    Consumer Discretionary
    -0.08%
    -2.86%
    0.53%
    5.25% undervalued
    18.68%
    29.87
    Industrial Products
    0.11%
    -2.88%
    -2.95%
    5.32% undervalued
    31.76%
    28.16
    Auto-Tires-Trucks
    -0.16%
    -2.12%
    -11.65%
    6.01% undervalued
    44.60%
    18.48
    Basic Materials
    0.48%
    -2.92%
    -7.81%
    6.86% undervalued
    50.30%
    34.71

     

      Seeking Alpha Readers should check out our Seeking Alpha VE Investment App HERE

     
     
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    ValuEngine.com - Rational advice, smarter investing.
    2
     
     
     
    Tags: XOM, oil, energy
    Jun 08 2:57 PM | Link | Comment!
  • June 7, 2011 Seeking Alpha Readers should check out our Seeking Alpha VE Investment App HERE Sole Survivor ING Group (ING,$ING) the Lone Finance Bright Spot in ValuEngine.com Stock Screen
    Go to ValuEngine.com
    June 7, 2011

    Seeking Alpha Readers should check out our Seeking Alpha VE Investment App HERE

    Sole Survivor

    ING Group (ING,$ING) the Lone Finance Bright Spot in ValuEngine.com Stock Screen

      While finance stocks have not made the grade from our proprietary models as of late, ING GROEP (NYSE:ING) turned up highly-rated in a screen for liquid stocks with low p/e ratios, high undervaluation ranks, and high short-term forecast figures.  In fact, out of 17 stocks in a recent screen, ING was the only Finance stock in a sea of Basic Materials tickers.  Analysts attribute the recent upswing in its share price to positive news about a possible prompt sale of its US operations--which was a requirement imposed by European regulators due to bailout funding.

     ValuEngine has issued a BUY recommendation for ING GROEP on Jun. 07, 2011. Based on the information we have gathered and our resulting research, we feel that ING GROEP has the probability to OUTPERFORM average market performance for the next year. The company exhibits ATTRACTIVE company size, market valuation and P/E ratio.

      Based on available data as of Jun. 07, 2011, we believe that ING should be trading at $22.99. This makes ING 49.36% undervalued. Fair Value indicates what we believe the stock should be trading at today if the stock market were perfectly efficient and everything traded at its true worth. For ING, we base this on actual earnings per share (NYSEARCA:EPS) for the previous four quarters of $1.65, forecasted EPS for the next four quarters of $2.51, and correlations to the 30- year Treasury bond yield of 4.26%.

      ING GROEP is a global financial institution of Dutch origin offering banking, insurance and asset management to
    over 50 million private, corporate and institutional clients in 65 countries.

    Market Indices Data
    Index
    Latest
    Change
    YTD
    Dow Jones
    12,162.60
    72.62
    5.05%
    NASDAQ Composite
    2,715.54
    12.98
    2.36%
    Russell 2000
    802.60
    7.28
    2.42%
    S&P 500
    1,293.78
    7.61
    2.87%

     

    ValuEngine Market Overview
    Summary of VE Stock Universe
    Stocks Undervalued
    57.09%
    Stocks Overvalued
    42.91%
    Stocks Undervalued by 20%
    23.12%
    Stocks Overvalued by 20%
    15.52%
     
    ValuEngine Sector Overview
    Sector
    Change
    MTD
    YTD
    Valuation
    Last 12-MReturn
    P/E Ratio
    Multi-Sector Conglomerates
    -0.82%
    -0.96%
    -0.02%
    14.44% overvalued
    34.02%
    24.96
    Utilities
    -0.88%
    -1.43%
    3.57%
    4.39% overvalued
    26.43%
    23.77
    Transportation
    -1.74%
    -2.66%
    -6.59%
    4.05% overvalued
    18.97%
    20.22
    Oils-Energy
    -2.59%
    -3.52%
    -2.19%
    3.07% overvalued
    42.28%
    56.89
    Consumer Staples
    -0.55%
    -1.82%
    -7.47%
    0.92% overvalued
    18.88%
    31.56
    Business Services
    -2.01%
    -2.51%
    0.82%
    0.62% undervalued
    18.64%
    26.58
    Medical
    -1.72%
    -2.82%
    12.10%
    2.23% undervalued
    18.79%
    31.33
    Aerospace
    -0.32%
    -0.71%
    11.19%
    2.35% undervalued
    27.22%
    17.91
    Retail-Wholesale
    -1.48%
    -2.95%
    1.93%
    2.98% undervalued
    23.54%
    33.64
    Computer and Technology
    -1.66%
    -2.87%
    5.50%
    3.05% undervalued
    34.33%
    37.81
    Finance
    -1.25%
    -1.90%
    -0.57%
    3.08% undervalued
    10.96%
    27.58
    Construction
    -1.76%
    -4.59%
    -9.75%
    4.81% undervalued
    3.99%
    29.11
    Consumer Discretionary
    -1.77%
    -2.85%
    0.57%
    5.01% undervalued
    15.40%
    30.11
    Industrial Products
    -1.51%
    -3.05%
    -3.23%
    5.30% undervalued
    28.80%
    28.20
    Auto-Tires-Trucks
    -1.83%
    -2.00%
    -11.54%
    5.74% undervalued
    41.33%
    18.49
    Basic Materials
    -2.40%
    -3.44%
    -8.32%
    7.11% undervalued
    48.42%
    34.60

     

      Seeking Alpha Readers should check out our Seeking Alpha VE Investment App HERE

     
     
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    Tags: ING, finance
    Jun 07 2:07 PM | Link | Comment!
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