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Steve Hach is the Senior Editor at ValuEngine.com, a Newtown, Pennsylvania-based stock valuation and forecast service. ValuEngine utilizes Ivy League financial research as the basis for its coverage of more than 7000 US, Japanese, and Canadian, and other foreign stocks. Hach utilizes... More
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  • ValuEngine Weekly February 25, 2011 2 comments
    Feb 25, 2011 2:26 PM | about stocks: BKS, ATPAQ, LNG, BPZ, DBLE, SPWR, BAS, SNP, WRES, STR, BP, FSLR, SD, AREX, ALJ, MHR, WNR

     

     

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    February 25, 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 www.valuengine.com!

    .

    ATTENTION Investors and Finance Professionals:
    If you are reading this you should
    sign up for ValuEngine's award-winning stock valuation and forecast service at the low price of $19.95/month! 
    NO OBLIGATION, Two Week FREE TRIAL!

    CLICK HERE!

    If the tables in this email do not display properly, please CLICK HERE to download the newsletter.

    VALUATION WATCH:  Our models find that overvaluation is approaching levels typically seen when a market correction is imminent. Overvalued stocks now make up almost 61% of our universe and 28% of the universe is calculated to be overvalued by 20% or more.  15 of 16 sectors are now calculated to be overvalued.

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

    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 Barnes & Noble Inc (BKS, $BKS).  Barnes & Noble, Inc. is engaged in the retail sale of trade books(generally hardcover and paperback consumer titles, excluding educational textbooks and specialized religious titles), mass market paperbacks (such as mystery, romance, science fiction and other popular fiction), children's books, off-price bargain books and magazines. These collectively account for substantially all of the company's bookstore sales. Bestsellers represent only a small portion of the Barnes & Noble, Inc. store sales.

      Our Forecast Model selected Barnes & Noble, Inc. as a short-side pick last week when we re-balanced our VE Forecast 16 Market Neutral Portfolio Newsletter.  This seemed contrarian at the time as bad news for Borders was being touted as a plus for Barnes & Noble, Inc..  The retailer was looking to scoop up Borders locations and garner market share from the demise of its large brick and mortar rival.  However, the stock has not faired well over the past few days and is currently is down more than 26% since last Thursday's newsletter re-balance.  Company officials announced the suspension of the stock's $0.25/share dividend this week.  Once more our Forecast Model is proving adept at stock picking under volatile market conditions.

     ValuEngine has issued a HOLD recommendation for Barnes & Noble, Inc. on Feb. 25, 2011. Based on the information we have gathered and our resulting research, we feel that Barnes & Noble, Inc. has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE price/sales ratio and expected EPS growth, but UNATTRACTIVE market valuation and momentum.

     Based on available data as of Feb. 25, 2011, we believe that BKS should be trading at $6.78. This makes BKS 109.51% 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 BKS, we base this on actual earnings per share (NYSEARCA:EPS) for the previous four quarters of -$1.11, forecasted EPS for the next four quarters of -$0.26, and correlations to the 30- year Treasury bond yield of 4.54%.

    Subscribers can check out the latest figures on Barnes & Noble, Inc. 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 BKS 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
    Index
    Week Open
    Thurs. Close
    Change
    % Change
    YTD
    DJIA
    12389.74 12068.5 -321.24 -2.59% 4.67%
    NASDAQ
    2795.44 2737.9 -57.54 -2.06% 4.49%
    RUSSELL 2000
    828.22 804.18 -24.04 -2.90% 3.78%
    S&P 500
    1338.91 1306.1 -32.81 -2.45% 4.69%
    ValuEngine Market Overview
    Summary of VE Stock Universe
    Stocks Undervalued
    39.2%
    Stocks Overvalued
    60.8%
    Stocks Undervalued by 20%
    16.52%
    Stocks Overvalued by 20%
    28.42%

    .

    ValuEngine Sector Overview
    Sector
    Change
    MTD
    YTD
    Valuation
    Last 12-MReturn
    P/E Ratio
    Oils-Energy 0.29% 2.58% 8.39% 27.28% overvalued 50.35% 43.00
    Basic Materials -0.24% -1.30% -3.07% 14.19% overvalued 63.93% 34.64
    Transportation 0.25% -2.70% -3.31% 12.52% overvalued 29.83% 26.72
    Multi-Sector Conglomerates -0.12% -3.01% 1.12% 12.39% overvalued 32.84% 28.72
    Business Services 0.55% 0.18% 1.83% 12.13% overvalued 20.39% 37.82
    Computer and Technology 0.75% 3.36% 8.00% 11.39% overvalued 38.94% 37.36
    Aerospace 0.72% -1.28% 3.25% 10.86% overvalued 32.03% 18.73
    Industrial Products 0.45% -0.04% 2.82% 8.93% overvalued 30.64% 28.40
    Finance 0.19% 1.34% 3.21% 8.22% overvalued 17.52% 24.70
    Retail-Wholesale 0.49% 2.47% 0.87% 8.08% overvalued 28.97% 27.92
    Consumer Staples -0.09% 0.33% -0.49% 7.57% overvalued 17.34% 27.03
    Auto-Tires-Trucks -0.55% -5.58% -5.42% 7.17% overvalued 44.87% 21.90
    Construction 0.62% -3.19% 0.59% 6.75% overvalued 13.84% 45.20
    Consumer Discretionary 0.07% 1.66% 2.47% 6.75% overvalued 26.11% 29.81
    Utilities -0.17% -0.83% 0.44% 5.93% overvalued 17.60% 26.15
    Medical 0.06% 1.28% 6.50% 1.54% undervalued 18.08% 44.16
      Sector Talk-- Oils/Energy

      Continued unrest in the Middle East has roiled oil markets once again.  Prices broke the critical $100/barrel limit this week only to fall back down on rumours that Colonel Muammar El Ghaddafi had been shot dead in Libya.  Gas pump prices have crept up to levels high enough to rouse the US consumer, and one wonders if renewed cries of "Drill Baby, Drill" can be far behind. 

      Below, we present top-five lists for the Oils/Energy 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 Oils/Energy Stocks--Short-Term Forecast Returns

    Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
    ATPG ATP OIL & GAS 18.43 26.3 8.99
    LNG CHENIERE ENERGY 9.06 -67.02 211.34
    BPZ BPZ RESOURCES 6.05 -71.2 -19.55
    DBLE DOUBLE EAGLE PE 10.82 0.67 154.59
    SPWRA SUNPOWER CORP-A 18.34 -49.07 -2.08

    Top-Five Oils/Energy Stocks--Long-Term Forecast Returns

    Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
    ATPG ATP OIL & GAS 18.43 26.3 8.99
    LNG CHENIERE ENERGY 9.06 -67.02 211.34
    BPZ BPZ RESOURCES 6.05 -71.2 -19.55
    BAS BASIC EGY SVCS 18.51 37.07 88.69
    SPWRA SUNPOWER CORP-A 18.34 -49.07 -2.08

    Top-Five Oils/Energy Stocks--Composite Score

    Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
    SNP CHINA PETRO&CHM 99.74 -8.59 36.26
    WRES WARREN RSRCS 4.63 -20.41 98.71
    STR QUESTAR 17.51 -14 33.05
    BP BP PLC 47.38 -17.14 -9.29
    FSLR FIRST SOLAR INC 164.68 -3.86 56.64

    Top-Five Oils/Energy Stocks--Most Overvalued

    Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
    SD SANDRIDGE ENRGY 9.18 300 13.9
    AREX APPROACH RESRCS 31.95 219.09 280.36
    ALJ ALON USA ENERGY 10.58 192.47 50.93
    MHR MAGNUM HUNTER 6.79 185.94 143.37
    WNR WESTERN REFING 15.37 123.62 240.8

      Subscribers can check out the latest valuation, forecast, and ratings figures on the Oils/Energy Sector from our Models HERE.

     Not a ValuEngine Premium Website member?  Then please consider signing up for our no obligation, two-week free trial today.   ValuEngine's award-winning stock Valuation and Forecast Models continue to provide investors with accurate, objective, and timely information on US stocks, ADRs, and foreign equities that trade on US markets.  Over the last few months, our stock picks have provided clients with many winners in both up and down periods.  Please consider signing up for our no obligation, two-week free trial today.

    To Sign Up for a FREE TRIAL, Please Click the Logo Below


      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.

      Training Tip
    --ValuEngine Benchmark Portfolio Strategies

      Screening for individual equities can often be a difficult task.  In order to simplify the process of selecting a portfolio, ValuEngine has created and tracked a variety of investment portfolio strategies which reflect varying investment objectives. Known as “benchmark portfolio strategies,” these strategies provide an excellent starting point for using ValuEngine's cutting-edge research to select a basket of stocks.

      ValuEngine Benchmark Portfolio strategies are designed to meet the return needs and risk/return profiles for different styles of investing. These strategies are based on our proprietary valuation, forecast, and rating models and have been extensively researched and tested. They serve as the foundation for all of our work with individual investors, institutional clients, and hedge funds.

       Currently on our website, you can find screening tools for three of ValuEngine's Benchmark Portfolio Strategies:   the VE Aggressive Growth Portfolio Strategy--formerly known as the "VE Standard," the VE Diversified Growth Portfolio Strategy--formerly know as the "VE Forecast,"  and the VE Top-Rated Portfolio Strategy.

    To View Current Holdings and Performance Tracking of our VE Benchmark Portfolio Strategies,CLICK HERE

     These strategies feature stocks selected according to specific criteria designed to meet the overall strategy goals for return and risk. All selections are based on calculations made by ValuEngine's proprietary stock valuation and forecast models as well as additional fundamental data—market capitalization, e/p ratio, momentum, dividend schedules—where applicable, as well as other factors.  For this week's training tip, we'll explain the various benchmark portfolio strategies and provide a link so you can apply them to your own investing.

    THE VE AGGRESSIVE GROWTH STRATEGY

      The VE Aggressive Growth Benchmark Portfolio Strategy is designed to provide maximum returns. It selects stocks for portfolios based on calculations on stock valuation supplied by ValuEngine's proprietary stock valuation model as well as other fundamental financial data. The VE Valuation Model calculates what a stock should trade at based on its fundamental economic data if the market were completely rational and efficient.  Of course--despite the claims of many--the market is not rational nor is it necessarily efficient.  If it were, there would never be a bubble or a panic-driven crash.  Over time, this strategy is highly successful when run in a market neutral configuration, but it does possess a high degree of volatility.

      The VE Aggressive Growth Benchmark Portfolio Strategy is based on the proprietary VE Composite Score Ranking system. This ranking system is designed to assess the attractiveness of each of the more than 5000 stocks in our database. The VE Composite Score Ranking system combines the following three factors: stock valuation, price momentum, and earnings/price ratio. Each of these quantitative measurements are ranked on a scale of 1 to 100. The higher the ranking, the more positive the influence each measurement has on the overall attractiveness of the stock. The sum of the three rankings forms the VE Composite Score Ranking. 

      Stocks with the highest scores are selected for the long side of the ValuEngine Aggressive Growth Portfolio. If two or more stocks have the same VE Composite Score Ranking, the VE Valuation Ranking is used as a tiebreaker. No diversity criteria are applied and thus this strategy is free to create a portfolio without sector limits in a search for maximum total return. This strategy allows better overall gains, but does result in an increase in volatility as the portfolios may be significantly over or underweighted on a sector basis depending on valuation and other calculations at the time of portfolio selection.

    THE VE DIVERSIFIED GROWTH STRATEGY

      The VE Diversified Growth Strategy relies on the stock-return forecast calculations of the VE Forecast Model. The ValuEngine Forecast model analyzes stock prices from a different perspective.  Unlike the Stock Valuation model--which merely states what a stock’s price should be assuming a totally efficient market, the VE Forecast Model predicts what a stock’s price will be at a specified future time period given current market conditions. 

      For the VE Diversified Growth portfolios, stocks predicted to provide the highest returns for each sector make up the long picks. By selecting one stock from each sector for the smallest 16 stock portfolio, sector diversity is achieved. This results in lower overall performance when compared to the VE Aggressive Growth Benchmark Portfolio Strategy but provides reduced volatility.

    THE VE TOP-RATED STRATEGY

      The VE Top-Rated Benchmark Portfolio Strategy also relies on the calculations of the VE FOrecast Model.  However, here we once again focus on maximum return and no diversity criteria are applied.  When you screen for a portfolio using this strategy, the main criteria is for the stocks to have the highest forecast one-year return.  There are no diversity criteria and the strategy is free to overweight or underweight sectors in a search for maximum return.

      All three Benchmark Portfolio Strategies include additional criteria such as market price, market cap, etc.  In this manner, some of the more volatile small caps are removed from consideration as our research program has found that this provides major risk reduction without significant reward penalties.

      You can always check out the performance of our benchmark portfolio strategies on our website by going to the ValuEngine Portfolios page.  HERE you can view the current and historic holdings of the portfolio and view performance data.  You can run the strategies for yourself and get baskets of stocks selected with up-to-the-day market data by going to our VE Benchmark Portfolios screening page HERE.  By running your own screens for the strategies, you can re-balance your portfolio according to your own needs.

    To Screen for Your Own Portfolio using our VE Benchmark Portfolio Strategies, CLICK HERE

     Custom feeds of our benchmark strategies in long only, market neutral, and other derivations as well as historical data and in-depth tracking information are available to ValuEngine customers for additional fees. Our research and development team is fast, agile, and experienced and can deploy the power of ValuEngine's proprietary models to help you develop a customized strategy and achieve your investment goals.   In addition, we are currently testing and developing several additional strategies and will launch a new dividend income strategy on the website soon.  To learn more, contact us at support@ValuEngine.com.

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

    With the ValuEngine Forecast Model Market Neutral Strategy Newsletter, you can run your own portfolio like a hedge fund to manage risk and profit in any market environment.

    Click HERE or on the Image Below to Sign Up for the ValuEngine Forecast Model MNS Newsletter

     

     

     

     An archive of this weekly newsletter is available here.

     
     
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    Themes: oil, energy Stocks: BKS, ATPAQ, LNG, BPZ, DBLE, SPWR, BAS, SNP, WRES, STR, BP, FSLR, SD, AREX, ALJ, MHR, WNR
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Comments (2)
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  • g8trgr8t
    , contributor
    Comments (546) | Send Message
     
    Wow, checking your picks vs stock prices today and it doesn't seem like your formulas are working very well/ top 5 overvalued are outperforming top 5 value
    16 Mar 2011, 10:01 PM Reply Like
  • Steve Hach
    , contributor
    Comments (4) | Send Message
     
    Author’s reply » Keep in mind that the valuation model and the forecast model make radically different assumptions about the nature of the market. One looks at pure fundamentals while the other looks at how the stock has traded in the past and tries to make future predictions.
    More here: tinyurl.com/4ojymbr
    Valuation models may have a tough time in the face of big market momentum--and the market is always right. Regardless, the model is always going to rate the stocks relative to each other and in the case of oil/energy it thinks they are overrated on fundamentals--but it is a computer and cannot know how things are going with Ghaddafi or in Japan.
    Long term, the overall ratings system and forecast figures do tend to provide a high degree of predictability and higher rated stocks provide better results than poorly rated ones...
    But here we find that a stock is overvalued but it may remain so for a long time and you would have trouble shorting in a speculative bubble or oil shock anyway.
    and, we typically provide the top 5 lists each week based on news headlines and overall market interest.
    17 Mar 2011, 01:06 PM Reply Like
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