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ValuEngine Weekly December 30, 2010

|Includes: AKS, BVN, CHOP, GMO, GOLD, MAG, Mesabi Trust (MSB), NEM, NGD, TRX, UEC, VALE, WWR



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December 30, 2010
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!


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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 62% of our universe and almost 30% of the universe is calculated to be overvalued by 20% or more.  15 of 16 Sectors are now calculated to be overvalued.

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ValuEngine Index Overview
Week Open
Wed. Close
% Change
11572.81 11585.4 12.59 0.11% 11.03%
2657.09 2666.93 9.84 0.37% 17.46%
786.9 790.26 3.36 0.43% 24.83%
S&P 500
1254.66 1259.78 5.12 0.41% 12.88%
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
Basic Materials 1.02% 9.40% 36.98% 31.91% overvalued 69.20% 38.12
Oils-Energy 0.77% 6.29% 20.12% 25.82% overvalued 36.01% 41.65
Industrial Products 0.12% 7.27% 25.18% 16.13% overvalued 30.59% 26.24
Multi-Sector Conglomerates 1.04% 5.43% 27.46% 15.20% overvalued 33.23% 29.73
Auto-Tires-Trucks 0.19% 6.52% 57.31% 13.49% overvalued 48.07% 26.05
Transportation 0.47% 3.83% 25.95% 12.26% overvalued 26.50% 42.71
Consumer Staples 0.20% 4.03% 11.68% 11.21% overvalued 17.41% 27.93
Retail-Wholesale 0.40% 3.37% 21.44% 10.66% overvalued 67.84% 22.32
Finance 0.12% 6.26% 22.16% 8.75% overvalued 18.67% 25.06
Computer and Technology 0.01% 5.73% 31.87% 7.83% overvalued 33.42% 43.79
Aerospace 0.16% 5.62% 24.91% 7.55% overvalued 30.97% 19.64
Utilities 0.52% 2.79% 7.59% 7.42% overvalued 11.41% 25.55
Business Services 0.25% 6.36% 14.77% 7.18% overvalued 20.93% 30.07
Construction -0.04% 9.13% 14.04% 6.73% overvalued 11.09% 38.21
Consumer Discretionary 0.43% 3.68% 22.81% 5.48% overvalued 25.65% 31.17
Medical 0.06% 8.34% 20.00% 2.64% undervalued 20.00% 37.79
  Sector Talk--Metals and Mining

 Commodity metals and minerals have been in the news again this week with Gold, Copper, Rare Earths, and other basic materials reaching high price levels with no end in sight.  Below, we present various top-five lists for various miners and metal producers from our Institutional software package (VEI).  These results were filtered by market price and volume--no results below 3$/share or less than 100k shares/day.

Top-Five Metals and Mining Stocks--Short-Term Forecast Returns

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
MSB MESABI TRUST 40.22 -13.52 232.67
CHOP CHINA GERUI ADV 5.85 2.2 3.91
TRE TANZANIAN ROYAL 7.32     N/A 113.41
AAUKY ANGLO AMER -PLC 26.03 39.83 21.64
URRE URANIUM RES INC 3.42     N/A 322.22

Top-Five Metals and Mining Stocks--Long-Term Forecast Returns

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
ABX BARRICK GOLD CP 53.08 12.97 34.96
MSB MESABI TRUST 40.22 -13.52 232.67
VALE VALE RIO DO-ADR 33.77 1.84 19.5
NEM NEWMONT MINING 61.19 9.38 29.23
FCX FREEPT MC COP-B 119.15 36.26 48.62

Top-Five Metals and Mining Stocks--Composite Score

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
MSB MESABI TRUST 40.22 -13.52 232.67
VALE VALE RIO DO-ADR 33.77 1.84 19.5
ABX BARRICK GOLD CP 53.08 12.97 34.96
NEM NEWMONT MINING 61.19 9.38 29.23
BVN BUENAVENTUR-ADR 48.91 9.41 47.41

Top-Five Metals and Mining Stocks--Most Overvalued

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
MVG MAG SILVER CORP 12.44 162.46 105.96
NGD NEW GOLD INC 9.63 117.04 163.84
AKS AK STEEL HLDG 16.27 116.14 -24.61
GMO GENERAL MOLY IN 7 103.12 230.19
UEC URANIUM ENERGY 6.29 97.84 70.92

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

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What's Hot
-- Suttmeier Releases 2011 Themes

  This week our Chief Market Strategist Richard Suttmeier finished off 2010 by releasing his top themes and predictions for 2011.   Here are the economic and market trends Suttmeier will be watching in the New Year:

1. Home Prices will resume a decline that began in mid-2006. We had the home buyer tax credits expire in mid-2010, and government sponsored mortgage modifications provided limited help. In 2011 we face continued foreclosure issues including questionable documentation, and banks have a record high Other Real Estate Owned (OTCPK:OREO). OREO is up to $53.2 billion at the end of the third quarter, up 338.2% since the end of 2007. Depressed home sales are being sold at a 30% to 35% discount, which reduces property appraisals at the county level. Home builders will have to compete with these lower prices and we need a mortgage modification program for all Americans, not just those at risk of losing their homes. QE2 is not working and US Treasury yields are higher causing mortgage rates to rise. “The Great Credit Crunch” began with housing, and that foundation needs repair before Main Street can recover with sustainable job creation.

2. Community Banks still have $1.43 trillion in commercial real estate loans that require resolution. The FDIC’s List of Problem Banks rose to 860 in the third quarter of 2010, which is 11.1% of all insured institutions. My analysis shows 2,485 or 32% of all banks overexposed to Commercial Real Estate loans, and 3,938 or 50.7% of all banks with real estate loan pipelines that are 80% to 100% funded. This stress needs to be addressed before jobs can be created on Main Street USA as housing and construction drive local economies. “The Great Credit Crunch” will not end without a program to remove toxic real estate loans from the books of community banks around the country.

3. The Banking System is supposed to de-lever risk, but it has not. When I look at the Notional Amount of Derivative Contracts I cringe at the fact that since the end of 2007 this risk category has grown $71.6 trillion since the end of 2007, that’s an increase of 43.5% to $236.4 trillion at the end of the third quarter in an environment where banks should be de-leveraging not adding to this risk where financial time bombs are ticking.

4. Fannie Mae and Freddie Mac will continue to drain taxpayer money as the Treasury provides unlimited lines of credit through 2012. The cost currently is about $150 billion, by far the largest of any government bailouts. We need to unwind the activities of these GSEs, and beef up Ginnie Mae as the go to government agency that backs new mortgage issuance.

5. Because of the housing market depression and stress in the banking system the Unemployment Rate will stay above 9% for all of 2011.

6. QE2, the $600 billion program where the Federal Reserve buys long dated US Treasury Securities has been a failure so far. The yield on the 10-Year was 2.334 when Fed Chief Bernanke touted QE2 in October only to see the yield nearly 125 basis points higher in December. The primary intent of QE2 was to lower longer-dated US Treasury yields. Yields held this week’s value level at 3.494 again on Wednesday. There is risk to 3.75 to 4.25 in 2011, but with or without this weakness the 10-Year yield will decline to 2.75 to 2.50 during 2011.

7. Comex Gold has gone parabolic and therefore you cannot predict how high gold prices can climb. I do know that corrections will be fierce and painful for those that buy strength instead of weakness. The 2011 neutral zone is between $1350 and $1450.

8. Nymex Crude Oil is headed back above $100 per barrel according to most experts. I cannot rule that out for 2011, but the downside is more significant given weekly closes below the $87 per barrel area. If gasoline stays above $3.00 per gallon demand on Main Street will slow down and will be a drag on economic growth and job creation.

9. Problems among the PIIGS nations denominated in euros will trump problems at the state level in the USA. This will keep the euro versus the dollar in a trading range. We will begin 2011 with a quarterly pivot around 1.3150.

10. US stocks show strong technical characteristics. The S&P 500 is above the 61.8% Fibonacci Retracement of the decline from October 2007 to the low of March 2009 at 1228.74. Dow Theory had a Buy Signal in early November and another confirmation in December. The Dow Industrial Average – I project downside to 9,375 in the first half with a rebound to 11,500 in the second half. Strength above 11,500 will return to 11,500, and the 2011 close will be at or below 11,500.

11. indicates that equity fundamental are not cheap. Fifteen of sixteen sectors will begin 2011 overvalued according to ValuEngine. The normal range for the percent undervalued or overvalued stocks is 35% to 65%. We will begin 2011 close to the low end of the range for undervalued stocks and towards the high end for overvalued stocks. Because of the battle between the technicals and fundamentals, stocks will be reversal-oriented in 2011 and be little changed year over year.

Click the icon below to hear VE Chief Market Strategist Richard Suttmeier
on's "The Real Story" Podcast






Happy New Year !

Mummers Carousing in the Streets of Philadelphia


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