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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 April 15, 2011 0 comments
    Apr 15, 2011 2:08 PM | about stocks: BAC, MBI, HTH, FAF, NCT, SFE, GRP.U, DFS, GGAL, ACAS, AHT, GRT, LAB, LXP, CNO, CLP

     

     

    Go to ValuEngine.com
    April 15, 2011

    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 now offering a FREE DOWNLOAD of one of our $ 25.00 Detailed Valuation Reports.  

      This week's free download is our report on Bank of America Corp (NYSE:BAC)Bank of America Corp. is one of the world's leading financial
    services companies. Bank of America provides individuals, small businesses and commercial, corporate and institutional clients across the United States and around the world.

      Along with Citigroup, Bank of America Corp remains among the financial crisis' "walking dead" and reported a big miss with its latest earnings report.  Still the biggest bank in the US,  Bank of America Corp saw profits decline 36%.  Analysts expected earnings of roughly $0.27/share but the company reported at $0.17/share.  Revenues declined for five out of six critical businesses year-over-year.

     ValuEngine has issued a HOLD recommendation for Bank of America Corp on Apr. 15, 2011. Based on the information we have gathered and our resulting research, we feel that Bank of America Corp has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE company size and market valuation, but UNATTRACTIVE momentum and 5-year annualized return.

     Based on available data as of Apr. 15, 2011, we believe that BAC should be trading at $17.88. This makes BAC 26.58% 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 BAC, we base this on actual earnings per share (NYSEARCA:EPS) for the previous four quarters of $0.88, forecasted EPS for the next four quarters of $1.53, and correlations to the 30- year Treasury bond yield of 4.54%.

     Subscribers can check out the latest figures on Bank of America Corp 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 BAC 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
    12380.43 12285.15 -95.28 -0.77% 6.30%
    NASDAQ
    2789.49 2760.22 -29.27 -1.05% 3.89%
    RUSSELL 2000
    841.54 827.47 -14.07 -1.67% 5.72%
    S&P 500
    1329.01 1314.52 -14.49 -1.09% 4.67%
    ValuEngine Market Overview
    Summary of VE Stock Universe
    Stocks Undervalued
    41.29%
    Stocks Overvalued
    58.71%
    Stocks Undervalued by 20%
    17.06%
    Stocks Overvalued by 20%
    26.64%

    .

    ValuEngine Sector Overview
    Sector
    Change
    MTD
    YTD
    Valuation
    Last 12-MReturn
    P/E Ratio
    Oils-Energy 0.57% -3.61% 9.48% 19.85% overvalued 34.40% 47.26
    Multi-Sector Conglomerates -0.12% -1.38% 3.47% 14.21% overvalued 22.68% 29.69
    Transportation 0.23% -2.72% -1.44% 12.00% overvalued 11.35% 21.55
    Utilities 0.51% -0.76% 4.16% 10.68% overvalued 14.95% 21.40
    Basic Materials 0.28% -1.79% -0.76% 9.42% overvalued 43.09% 25.44
    Consumer Staples -0.22% -0.61% -0.90% 9.19% overvalued 12.45% 19.17
    Business Services 0.39% -1.16% 4.44% 8.60% overvalued 10.43% 50.58
    Industrial Products 0.35% -3.59% 3.83% 8.10% overvalued 18.35% 29.97
    Aerospace -0.43% -3.14% 12.26% 7.21% overvalued 16.47% 19.08
    Retail-Wholesale 0.22% -0.73% 4.77% 6.69% overvalued 13.77% 28.82
    Computer and Technology 0.17% -1.59% 10.25% 6.00% overvalued 24.40% 45.02
    Finance 0.20% -1.74% 1.62% 5.79% overvalued 2.89% 25.75
    Construction -0.33% -3.74% -1.40% 5.08% overvalued 0.52% 33.89
    Consumer Discretionary 0.33% -0.47% 4.91% 4.11% overvalued 9.50% 32.90
    Auto-Tires-Trucks -1.00% -5.79% -8.02% 4.09% overvalued 26.18% 19.76
    Medical 0.17% 0.03% 12.28% 1.90% overvalued 9.52% 37.98
      Sector Talk--Finance

      Below, we present the latest data on the Finance Sector from our Institutional software package (Pending:VEI).  We applied some basic liquidity criteria--share price greater than $3 and average daily volume in excess of 100k shares.

    Please Click Here to Download a FREE Demo of ValuEngine's Professional VEI Software Package.

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

    Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
    MBI MBIA INC 8.93 -17.88 12.47
    HTH HILLTOP HLDGS 9.6     N/A -17.17
    FAF FIRST AMER FINL 15.5 -3.16     N/A
    NCT NEWCASTLE INV 5.69 -69.96 46.27
    SFE SAFEGUARD SCTFC 19.22 -75 37.48

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

    Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
    MBI MBIA INC 8.93 -17.88 12.47
    HTH HILLTOP HLDGS 9.6     N/A -17.17
    FAF FIRST AMER FINL 15.5 -3.16     N/A
    SFI ISTAR FINL INC 9.08 -11.27 40.34
    MIM MI DEVLPMNTS -A 28.49     N/A 112.61

    Top-Five Finance Stocks--Composite Score

    Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
    DFS DISCOVER FIN SV 23.95 -0.29 50.25
    SFE SAFEGUARD SCTFC 19.22 -75 37.48
    GGAL GRUPO GALIC ADR 13.28 -3.01 112.14
    ACAS AMER CAP LTD 9.55 -14.13 71.76
    AHT ASHFORD HOSPTLY 11.05 -36.72 29.39

    Top-Five Finance Stocks--Most Overvalued

    Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
    GRT GLIMCHER REALTY 9 208.6 39.1
    LAB LABRANCHE & CO 4.19 167.45 -29.22
    LXP LEXINGTON PPTY 9.36 151.89 34.1
    CNO CNO FINL GRP 7.49 122.35 13.48
    CLP COLONIAL PPTYS 19.22 111.25 28.82

      Subscribers can check out the latest valuation, forecast, and ratings figures on the Finance Sector 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.com's software and website!
     

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

      What's Hot
    --Latest FDIC Report is Posted

    Richard Suttmeier Warns of Continued Housing/Banking Trouble in Latest ValuEngine FDIC Report

      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:

      In its most recent statement, the Federal Reserve said that the economic recovery is on firmer ground with an overall gradual improvement in the labor market. While the Fed recognized that commodity prices are putting upward pressure on inflation, they argued that this is temporary. They recognized the sharp run-up in energy costs-- caused by supply concerns, but left their blinders on by asserting that longer-term inflation expectations are stable-- with underlying inflation still subdued. 

     Why is it that the FOMC still believes that Americans do not need to eat or buy gasoline?

     The Fed will continue to expand their balance sheet via the $600 billion QE2--which continues through June --and they will continue to buy US Treasuries to replace maturing mortgage-backed securities. In addition, they are continuing to keep the federal funds rate at zero to 0.25%.

     However, in my view the key to the Main Street economy is the housing market as well as nonresidential construction. The housing market is normally 15% of the US economy but it has been depressed since home values peaked in mid-June 2006. Until we see improvement there, we will not be able to sustain the recovery.

     Meanwhile, Community banks declare that they were not the cause of “The Great Credit Crunch,” despite the fact that they participated by extending commercial real estate (CRE) loans-- including construction and development (C&D) loans-- with loan commitments well above the regulatory guidelines versus risk based capital. We all know the saga of the regional banks, but even now those “troubled assets” remain hidden on their balance sheets—and this problem extends to those still considered “too big to fail.”

      I recently published a research note on Forbes.com which featured critical FDIC asset data from the 2001 through 2010 period. This data shows that several asset classes have expanded at a faster pace relative to Current Dollar GDP. This indicates that the banking system remains over-leveraged.

     For more proof that banks remain in perilous condition, consider the fact that 25% of all FDIC-insured financial institutions reported a net loss in the 4th quarter. Rather than being indicative of a strong recovery, reported improvements in quarterly earnings are largely the result of lower loan-loss provisions. 

    We are NOT Out of the Woods Yet!

     

      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.

     

      As of April 8, 2011, there were 232 banks overexposed to C&D and/or CRE loans in the ValuEngine database with full data coverage. There were two additional overexposed banks with partial data coverage.Of the overexposed banks with full data coverage, 55 were rated “1-Engine” Strong Sells, 65 were rated “2-Engine” Sells, 104 were rated “3-Engine” Holds, and six were rated a “4-Engine” Buy. There were no Strong Buy-rated banks on the list This means that there are currently 120 banks rated Sell or Strong Sell that are also overexposed to C&D and/or CRE loans.   There are 291 additional institutions listed as a problem bank list that do not appear in the ValuEngine database but are carrying C&D and/or CRE loans in excess of the FDIC guidelines.

    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. 

     

    --Valuation Watch is OFF

    ValuEngine Market Valuation Figures Decline into Normal Range

      The ValuEngine Valuation Model tracks more than 5500 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 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 @ 60% for the overall universe and 27.5% for the overvalued by 20% or more categories, we issue a valuation watch.  

      We issued our latest Valuation Watch with the SP 500 at the 1319 level and the overall universe valuation figure at 60.89%.  We ended the watch on April 13th with the SP 500 at 1314.16 and the overvaluation at 58.64%.  Currently, overall universe valuation figure is at 58.71% based on yesterday's SP 500 close of 1314.52.  We will continue to watch this metric and stand ready to re-issue our Valuation Watch if the numbers start to creep up again..

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

     

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