As a long term focused valuation methodology, Greatly Overvalued is the most negative rating we can have on a stock. In our view, this rating means one of two things: either the stock is too hot and has risen too quickly, or the stock has seen deterioration in underlying fundamentals that have not yet been reflected in their price. Just because a stock is overvalued doesn’t mean that it is due for a slide, but rather we think that it is not an attractive buy candidate and may be ripe for taking profits. Essentially, these stocks are trading for higher levels of price-to-cash earnings and price-to-sales (among other fundamental valuation metrics) than has been normal throughout their recent history.
At Ockham, we recently released a new stock screening tool on our site that we now use daily around the office to more efficiently wade through our coverage of over 8400 stocks. One interesting filter we used today was to see stocks that have our Greatly Overvalued rating, and also have been mentioned in the financial media within the last 30 days according to RazorWire. These stocks represent a subset of our most negative ratings that are also attracting some attention lately either because of earnings releases or some other reason to be mentioned on business television or influential financial blogs.
I am aware that the image of the screener is too small to read, so the list has been recreated below. These stocks come from a variety of sectors but the highest concentration is in Basic Materials, Consumer Goods (particularly auto-related), and Energy sectors. We are not saying investors in these stocks need to sell and plant their money on the sidelines, but it may be worthwhile to reexamine exit strategies because their prices have become a bit too stretched based on current fundamentals. So, here are the 18 stocks that met the criteria listed in order of largest capitalization to smallest.
Greatly Overvalued Stocks with at least one RazorWire Capture in the Last 30 Days:
- Occidental Petroleum (NYSE:OXY)
- ArcelorMittal (NYSE:MT)
- Caterpillar (NYSE:CAT)
- Johnson Controls (NYSE:JCI)
- PACCAR, Inc (NASDAQ:PCAR)
- Vornado Realty (NYSE:VNO)
- Kinder Morgan Energy Partners (NYSE:KMP)
- Eaton Corporation (NYSE:ETN)
- Fidelity National Info Services (NYSE:FIS)
- Cliffs Natural Resources (NYSE:CLF)
- Cree, Inc. (NASDAQ:CREE)
- Eastman Chemical Company (NYSE:EMN)
- BorgWarner, Inc. (NYSE:BWA)
- Autoliv, Inc. (NYSE:ALV)
- M.D.C. Holdings (NYSE:MDC)
- Redwood Trust (NYSE:RWT)
- Imax Corp (NYSE:IMAX)
- Permian Basin Royalty Trust (NYSE:PBT)