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ValuEngine Weekly Newsletter, May 13, 2011

May 13, 2011 11:54 AM ETJNJ, PPL, ERIC, GLBC, TWTC, GA
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  May 13, 2011

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

VALUATION WATCH: Valuation at current levels is considered to be within "normal" range and therefore the Valuation Watch is OFF.

ValuEngine Index Overview
Week Open
Thurs. Close
% Change
12637.83 12695.9 58.07 0.46% 9.66%
2828.24 2863.04 34.8 1.23% 7.92%
832.38 847.53 15.15 1.82% 8.15%
S&P 500
1340.2 1348.65 8.45 0.63% 7.24%
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
Multi-Sector Conglomerates 0.72% 0.23% 6.56% 12.16% overvalued 26.94% 28.59
Utilities 0.57% -0.62% 6.54% 11.40% overvalued 20.67% 23.96
Business Services 0.56% 0.75% 7.95% 9.12% overvalued 11.32% 38.05
Oils-Energy -0.31% -6.84% 2.35% 8.16% overvalued 32.07% 47.37
Retail-Wholesale 0.75% 1.88% 9.27% 7.90% overvalued 17.82% 35.64
Consumer Staples 0.47% -1.31% -2.27% 7.73% overvalued 15.07% 20.98
Computer and Technology 0.47% -1.02% 12.21% 7.26% overvalued 28.62% 45.70
Transportation -0.10% -0.81% 0.62% 6.84% overvalued 15.00% 20.49
Industrial Products -0.00% -2.73% 5.48% 6.35% overvalued 19.93% 32.39
Aerospace 0.81% 0.55% 14.15% 5.70% overvalued 19.34% 19.18
Consumer Discretionary 0.23% 0.91% 8.06% 5.50% overvalued 12.22% 30.39
Medical 0.80% 0.72% 16.39% 4.77% overvalued 15.02% 35.30
Auto-Tires-Trucks -0.09% -2.44% -3.50% 4.39% overvalued 40.47% 20.17
Finance 0.35% 1.07% 4.50% 4.17% overvalued 4.78% 25.34
Construction 0.16% -3.09% -2.35% 0.63% undervalued -1.90% 49.08
Basic Materials -0.32% -5.35% -5.10% 1.45% undervalued 33.77% 23.90
  Sector Talk--Utilities Stocks

  For the first time in a very long while utilities stocks were in the news this week as some sector rotation took place.  The decline in commodities prices led to a flight to safety.  Below, we present the latest data on the Utilities Sector from our Institutional software package (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 Utilities Sector Stocks--Short-Term Forecast Returns

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
PT PORTUGAL TELCOM 12.5 3.72 23.76
SBS SABESP -ADR 58.76 34.99 52.46
TEF TELEFONICA S.A. 24.24 -0.67 29
BT BT GRP PLC-ADR 32.71 -11.1 90.29
PPL PPL CORP 28.03 -22.52 14.04

Top-Five Utilities Sector Stocks--Long-Term Forecast Returns

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
PT PORTUGAL TELCOM 12.5 3.72 23.76
SBS SABESP -ADR 58.76 34.99 52.46
PPL PPL CORP 28.03 -22.52 14.04
TEF TELEFONICA S.A. 24.24 -0.67 29
HNP HUANENG POWER 22.93 -35.26 8.83

Top-Five Utilities Sector Stocks--Composite Score

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
BT BT GRP PLC-ADR 32.71 -11.1 90.29
TEF TELEFONICA S.A. 24.24 -0.67 29
PPL PPL CORP 28.03 -22.52 14.04
PT PORTUGAL TELCOM 12.5 3.72 23.76
NZT TELECOM CORP NZ 9.12 -18 31.6

Top-Five Utilities Sector Stocks--Most Overvalued

Ticker Name Mkt Price Valuation(%) Last 12-M Retn(%)
S SPRINT NEXTEL 5.17 300 24.58
VG VONAGE HOLDINGS 4.84 102.73 164.48
GLBC GLOBAL CROSSING 29.75 96.22 98.47
TWTC TW TELECOM INC 22.74 80.73 25.64
GAS NICOR INC 55.82 41.95 34.18


  Currently, you can 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:


Our banking regulators, Congress, and the Obama Administration have ignored the root causes of “The Great Credit Crunch” – the bursting of the housing bubble and the problems in community banks, which are the key to economic growth on Main Street, USA. The costs of the wave of bank failures continues to stifle the recovery, and more problems come to the fore the longer the crisis drags on...

  Recently, the FDIC projected that the cost of bank failures between 2011 and 2015 will be $21 billion, compared to $24 billion for all failures in 2010. The FDIC projects that at current assessment rates the DIF will end 2011 positive and will reach 1.15% of estimated insured deposits in 2018.

  The FDIC also remains too optimistic about additional bank failures. The FDIC list of problem banks rose to 884 FDIC-insured financial institutions at the end of 2010, which is 11.5% of all 7,657 banks under the FDIC’s watch. Because of the $250,000 per bank guarantee on insured deposits, the size of the pool of insured deposits is also on the rise.

  Before the Dodd-Frank Wall Street Reform Bill, the DIF was required to be at 1.15% of insured deposits by the end of June 2013--five years from when the ratio fell below 1.15%.

  Under Dodd-Frank, the DIF fund reserve ratio must reach 1.35% by September 30, 2020. So Dodd-Frank kicked this can down the road by seven years and increased the percentage deemed to be in regulatory balance. In my opinion, the Dodd-Frank Bill puts additional pressure on the larger FDIC-insured financial institutions, including those considered “too big to fail.”

  Due to these new requirements, as well as the continued trouble in the banking system, I don't believe that the FDIC will be able to meet the funding requirements for the DIF-- even by 2020.

  In addition, as the FDIC increases bank assessments consumers will face additional costs which will hinder the recovery. Banks will most likely pass on the costs associated with higher assessments in the form of new consumer and business loan fees, higher interest rates, tighter credit standards, etc.  I am sorry to say that even at this late date I remain convinced that we are nowhere near the end of the crisis in our banking system and the associated ills plaguing the credit and housing markets.

  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.

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. 

Subscribers can download it HERE.

Others interested in the report may find out more on our website by clicking the image below.


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



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