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Steve Hach
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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 Re-Issues Market Valuation Warning 0 comments
    Mar 11, 2013 2:49 PM

    VALUATION WARNING: Our models find that overvaluation is at levels typically seen when market pullbacks occur. Overvalued stocks now make up 65% of our universe and almost 28% of the universe is calculated to be overvalued by 20% or more. 15 of 16 sectors are calculated to be overvalued.

    Valuation WARNING is Back ON

    ValuEngine Re-Issues Market Valuation Warning

    ValuEngine has re-issued a market valuation warning as of today, March 11th. Our overall market overvaluation and overvalued by 20% or more figures have reached levels which have been correlated with market pull backs in the past. Strong market performance drives these calculations right now., We first issued a Valuation Watch back in January. High valuations continued through February and declined just slightly at the end of that month. We had a respite from February 26th until March 6th. This is a time for investors to keep a close eye on the market and to consider booking some profits and perhaps hedging against a move to the downside.

    The ValuEngine Valuation Model tracks more than 8000 US equities, ADRs, and foreign stock which trade on US exchanges. The model calculates a level of mispricing or valuation percentage for each equity based on what the stock should be worth if the market were totally rational and efficient--an academic exercise to be sure, but one which allows for useful comparisons between equities, sectors, and industries.

    We track market valuation figures and use them as a metric for making calls about the overall state of the market. Whenever we see levels in overvaluation levels in excess of @ 65% for the overall universe and/or 27% for the overvalued by 20% or more categories, we issue a valuation warning. As of Friday's close, we now calculate that 65.16% of stocks are overvalued and 27.42% of stocks are overvalued by 20% or more.

    In addition to the overall valuation metrics, we see that on a sector basis 15 of 16 sectors are calculated to be overvalued. In the past, our Chief Market Strategist Richard Suttmeier has used the sector valuation figures to buttress his macro market calls. This is another indicator that stocks are no longer the bargain they were a few months ago and that investors should consider implementing additional risk management tools and/or booking some profits.

    Market Overview
     

     

    Summary of VE Stock Universe

     

    Stocks Undervalued

    34.52%

    Stocks Overvalued

    65.48%

    Stocks Undervalued by 20%

    14.22%

    Stocks Overvalued by 20%

    27.97%

    Sector Overview

    Sector

    Change

    MTD

    YTD

    Valuation

    Last 12-MReturn

    P/E Ratio

    Aerospace

    2.37%

    3.07%

    9.31%

    9.60% overvalued

    5.26%

    14.14

    Auto-Tires-Trucks

    1.46%

    2.33%

    8.18%

    16.19% overvalued

    5.46%

    16.15

    Basic Materials

    0.69%

    3.33%

    5.29%

    4.01% undervalued

    -28.51%

    18.97

    Business Services

    1.13%

    3.31%

    11.03%

    16.04% overvalued

    10.93%

    21.58

    Computer and Technology

    0.59%

    2.09%

    10.58%

    16.92% overvalued

    2.06%

    26.12

    Construction

    0.78%

    2.64%

    11.28%

    23.68% overvalued

    25.44%

    25.89

    Consumer Discretionary

    0.40%

    3.23%

    11.98%

    13.37% overvalued

    8.16%

    22.99

    Consumer Staples

    0.29%

    3.58%

    8.83%

    23.50% overvalued

    9.42%

    19.22

    Finance

    0.37%

    2.33%

    11.29%

    18.56% overvalued

    13.80%

    17.58

    Industrial Products

    1.15%

    3.35%

    12.19%

    17.05% overvalued

    6.74%

    18.82

    Medical

    0.45%

    2.77%

    11.12%

    10.38% overvalued

    9.69%

    23.9

    Multi-Sector Conglomerates

    0.03%

    0.91%

    5.02%

    10.37% overvalued

    13.42%

    15.64

    Oils-Energy

    0.75%

    1.78%

    8.52%

    6.19% overvalued

    -13.68%

    24.17

    Retail-Wholesale

    0.59%

    2.67%

    13.30%

    16.93% overvalued

    14.52%

    19.94

    Transportation

    0.85%

    2.87%

    17.09%

    20.50% overvalued

    4.71%

    20.31

    Utilities

    0.60%

    2.09%

    6.37%

    11.70% overvalued

    2.59%

    17.76

    Themes: valuation
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