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ValuEngine Weekly January 21, 2010




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January 21, 2011
The ValuEngine Weekly is an Investor Education newsletter focused on the quantitative approach to investing and the tools available from ValuEngine. In today's fast-moving and globalized financial markets, it is easy to get overloaded with information. The winners will adopt an objective, scientific, independent and unemotional approach to investing. If you are not yet a member of ValuEngine's stock analysis service, sign up now for a two-week free trial at!


ATTENTION Investors and Finance Professionals:
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VALUATION WATCH:  Our models find that overvaluation is approaching levels typically seen when a market correction is imminent. Overvalued stocks now make up almost 63% of our universe and 28% of the universe is calculated to be overvalued by 20% or more.  ALL Sectors are now calculated to be overvalued.

  Bonus for Readers
--Free Individual Stock Report for Weekly Newsletter Subscribers

 As a bonus to our Free Weekly Newsletter subscribers, we are now offering a FREE DOWNLOAD of one of our $ 25.00 Detailed Valuation Reports.  

  This week's free download is our report on FirstBanc Corp/FirstBanc Puerto Rico (FBP, $FBP).   Subscribers to our ValuEngine Forecast Model MNS Portfolio Newsletter received their latest edition on Tuesday for a monthly re-balance.  This newsletter features a long and short side of 16 stocks from each sector we cover.  The recent market unrest over earnings, CEO health issues, and other factors have hit some financials particularly hard. 

  This has been a boon to our Forecast MNS subscribers since their short-side financial sector pick for the month was one of the hardest hit banks, FirstBanc Puerto Rico (FBP, $FBP).  First BanCorp operates as the holding company for FirstBanc Puerto Rico that provides a range of financial services and products to retail, commercial, and institutional clients in Puerto Rico, the United States, and the British Virgin Islands.  FirstBanc Puerto Rico distinguished itself by providing innovative marketing strategies and novel products to attract clients.  Besides the branches and lending offices, the Corporation has offered a telephone information service called Telebanco since 1983. This was the first telebanking service offered in Puerto Rico. The Corporation's clients have access to an extensive ATM network all over the world. The Corporation was the first in Puerto Rico to open on weekends and the first to offer in-store branches to its clients.

  Yesterday,  FBP received a downgrade from "Hold" to "Sell" from Cantor Fitzgerald and was one the NYSE's biggest losers the past few days.  The stock was entered into our Forecast Model MNS Portfolio based on data from last Friday's close at $7.10/share.  It closed yesterday at $5.40/share for a quick 24% gain in just two days.   The model's recalculated 1-Month Forecast Return is now -4.56% for a share price target of $5.15.

  Investors should remember that VE's proprietary Valuation and Forecast Models recalculate the entire universe of more than 5500 equities every single trading day and that as FBP's share price fluctuates, there may be additional changes to both the valuation and forecast return calculations.

 ValuEngine has issued a STRONG SELL recommendation for FirstBanc Puerto Rico. Based on the information we have gathered and our resulting research, we feel that FirstBanc Puerto Rico has the probability to UNDERPERFORM average market performance for the next year. The company exhibits UNATTRACTIVE momentum, volatility and P/E ratio.

 Based on available data as of Jan. 21, 2011, we believe that FBP should be trading at $5.63. This makes FBP 4.00% overvalued. 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 FBP, we base this on actual earnings per share (NYSEARCA:EPS) for the previous four quarters of -$2.12, forecasted EPS for the next four quarters of -$0.07, and correlations to the 30- year Treasury bond yield of 4.62%.

  Subscribers can check out the latest figures on FirstBanc Puerto Rico from our models HERE.   Not a ValuEngine Premium Website member?  Then please consider signing up for our no obligation, two-week free trial today. 

Weekly Subscribers can download a FREE Detailed Valuation Report on FBP 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.


ValuEngine Index Overview
Week Open
Thurs. Close
% Change
11783.82 11822.8 38.98 0.33% 2.59%
2744.8 2704.29 -40.51 -1.48% 2.19%
807.57 778.08 -29.49 -3.65% -0.45%
S&P 500
1293.22 1280.26 -12.96 -1.00% 2.30%
ValuEngine Market Overview
Summary of VE Stock Universe
Stocks Undervalued
Stocks Overvalued
Stocks Undervalued by 20%
Stocks Overvalued by 20%


ValuEngine Sector Overview
Last 12-MReturn
P/E Ratio
Oils-Energy -1.15% 0.66% 0.66% 28.50% overvalued 32.56% 47.25
Basic Materials -2.08% -5.17% -5.17% 18.55% overvalued 42.31% 39.18
Multi-Sector Conglomerates -0.86% 1.37% 1.37% 15.67% overvalued 30.38% 34.09
Auto-Tires-Trucks -2.29% -1.32% -1.32% 14.73% overvalued 32.72% 20.05
Business Services -1.35% 0.41% 0.41% 13.33% overvalued 15.36% 32.63
Transportation -1.24% -2.36% -2.36% 13.30% overvalued 22.76% 27.97
Industrial Products -1.45% -0.92% -0.92% 11.70% overvalued 25.44% 31.85
Aerospace -0.72% 2.66% 2.66% 10.78% overvalued 31.81% 18.90
Computer and Technology -1.47% 7.48% 1.60% 10.10% overvalued 31.70% 36.72
Utilities -0.57% -0.19% -0.19% 7.76% overvalued 14.04% 20.47
Retail-Wholesale -0.07% -2.40% -2.40% 7.71% overvalued 23.07% 26.63
Finance -0.56% -0.31% -0.31% 7.55% overvalued 15.39% 27.85
Consumer Staples -0.17% -0.80% -0.80% 6.93% overvalued 16.98% 24.60
Consumer Discretionary -0.79% -1.48% -1.48% 5.56% overvalued 20.87% 30.51
Construction -0.63% 1.01% 1.01% 2.60% overvalued 9.13% 28.97
Medical -0.73% 0.85% 0.85% 0.79% undervalued 14.38% 35.68
  Sector Talk--Finance*

  As noted above, Finance has had some earnings issues and other surprises this week.  Big players like CitiGroup, Morgan Stanley, Bank of America, and Goldman Sachs have risen or fallen on the strength of their earnings.  Below, we present top-five lists for the Finance Sector from our Institutional software package (Pending:VEI).  These results were filtered by market price and volume--no results below 3$/share or less than 100k shares/day.

Top-Five Finance Stocks--Short-Term Forecast Returns

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
FAF FIRST AMER FINL 15.38 4.9     N/A
BFR BANCO FRANC-ADR 12.08 -57.75 95.15
NCT NEWCASTLE INV 6.95 -66.4 235.75
AIG AMER INTL GRP 43.18 -75 54.43
C CITIGROUP INC 4.8 -63.45 38.73

Top-Five Finance Stocks--Long-Term Forecast Returns

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
FAF FIRST AMER FINL 15.38 4.9     N/A
ACTG ACACIA RES-TECH 27.96 -0.69 210.32
AIG AMER INTL GRP 43.18 -75 54.43
BEE STRATEGIC HOTEL 5.24 8.6 100.77
GGAL GRUPO GALIC ADR 16.27 30.47 195.28

Top-Five Finance Stocks--Composite Score

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
C CITIGROUP INC 4.8 -63.45 38.73
AIG AMER INTL GRP 43.18 -75 54.43
ACAS AMER CAP LTD 8.04 -10.48 83.98
AMP AMERIPRISE FINL 59.62 -7.22 44.6
UBS UBS AG 17.34 -47.28 13.93

Top-Five Finance Stocks--Most Overvalued

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
NRF NORTHSTAR RLTY 4.94 256.88 6.7
MPG MPG OFFICE TRST 3.45 191.65 77.84
WL WILMINGTON TRST 4.29 171.72 -70.62
CLP COLONIAL PPTYS 18.5 146.06 56.38
CNO CNO FINL GRP 6.55 144.69 24.05

  *NOTE:  The author has a long position in CitiGroup.

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

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

  Currently, you research more than 400 ADRs and other foreign stocks with ValuEngine's software and website! 

We also offer research reports on more than 700 Canadian Companies on our Research Report Web Page.


What's Hot

Suttmeier's Buy and Trade Strategy

  ValuEngine Chief Market Strategist Richard Suttmeier is a financial analyst for media such as Fox News, CNBC,YahooFinance,the Wall Street Journal, New York Times, CNNfn, and Bloomberg, Suttmeier has long been one of ValuEngine's "power users," supporting his own technically-focused analysis with VE's fundamentally-based quant methods. 

   This week Richard appeared at the Orlando, Florida chapter of the American Association of Individual Investors (AAII) to discuss his market outlook for 2011, his method of stock picking using ValuEngine and Technical Analysis, and the "Buy and Trade" strategy upon which his popular ValuTrader Model Portfolio Newsletter is based.

  Below, we include some highlights on "Buy and Trade" from his presentation in Orlando:

Investors Do NOT want to Buy High and Sell Low
  When a stock moves lower, the tendency is to sell at or near a bottom. For equity money managers, they may have to sell to meet redemptions. When a stock moves higher, many investors try to chase the momentum. For equity money managers, it’s chasing performance.

Buy and Trade Avoids this Pitfall
  A bad reaction to an earnings report typically forces investors to sell a buy-rated stock. However,  with “Buy and Trade” you add to the position at a value level.  Similarly, when investors chase stocks that pop higher on positive earnings reports, you sell the strength at a risky level and book a nice profit.

A Successful Strategy Leaves some Money on the Table

To Implement Buy and Trade, Combine ValuEngine’s Fundamentally-Based Ratings System and Technical Analysis for Individual Equities. 

Use ValuEngine Buy/Sell/Hold Calls

Establish Technical Levels for Each Equity

A value level is a price at which investors should add to a long position on share price weakness, or begin to cover a short position.

A risky level is a price at which investors should reduce a long position on share price strength, or add to a short position.

A pivot is a price that should be a magnet during the time frame specified. This is a level at which to consider more aggressive positions adjustments. A violated value level and risky level becomes a pivot for the remainder of the time horizon and has an 85% chance of being tested in that time period.

These levels are calculated in weekly (NYSE:W), monthly (NYSE:M), quarterly (NYSE:Q), semiannual (NYSE:S) and annual (NYSE:A) time horizons, based on the past nine closes in each time horizon.  My theory is that the closes over a nine-year period are the summation of all bullish and bearish events for that market or specific stock. These levels are the most important element of the Buy and Trade Strategy.

Two Practical Examples of Buy and Trade from Suttmeier's ValuTrader Model Portfolio


Entered the ValuTrader Model Portfolio at $19.40 on Feb 8th, sold at $23.57 on April 14th for a gain of 21.5%.

Entered again at $20.25 on May 21st, sold at $21.95 on June 3rd for a gain of 8.4%.

Entered again at $20.38 on June 7th and added to on July 1st on weakness to $19.07. Sold at $19.94 on July 7th for a FIFO loss of 1.7%. The second position was sold at $22.06 on July 14th for a gain of 15.7%.

Entered again at $19.17 on August 12th, sold at $21.59 on November 12 for a gain of 12.6%.

Intel returned on January 3rd at $20.80.



Entered the ValuTrader Model Portfolio at $32.30 on Feb 8th, sold at $35.96 on April 22nd for a gain of 11.3%.

Entered again at $31.00 on May 21st, sold at $33.46 on June 18th for a gain of 7.9%.

Entered again at $30.15 on June 24th and added a second position on weakness to $28.48 on August 11th, both were sold at $29.05 on Sept 2nd for a loss of 3.6% and a gain of 2.0%.

Entered again at $25.90 on Sept 22nd, sold at $27.89 on October 2nd for a gain of 7.7%.

Entered again at $27.80 on Dec 14th, sold at $30.98 on Dec 21st for a gain of 11.4%

Stock currently rates a BUY at $32.14, but is projected to gain less than 7.5% over the next twelve months.

  We will post Suttmeier's entire presentation to our website within the next week or so.  we will include a link to it in next week's bulletin.

 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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