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SECTOR OVERVIEW
Last 12-M
Industry Change MTD YTD Valuation P/ERatio
Return
METAL FABRICATORS & -1.75% 6.01% 53.86% 34.42% overvalued 95.83% 23.72
PRECIOUS METALS -0.53% 14.91% 119.79% 27.65% overvalued 180.34% 42.34
BUILDING & RELATED -1.71% 7.14% 29.60% 25.53% overvalued 62.45% 38.82
CHEMICALS -1.03% 5.55% 77.50% 11.24% overvalued 67.69% 22.40
STEEL -1.96% 8.80% 34.09% 10.41% overvalued 110.46% 30.96
NONFERROUS BASE META -1.49% 9.51% 94.19% 9.61% overvalued 136.65% 24.83
CONTAINERS -1.51% 4.20% 35.50% 5.31% undervalued 52.68% 14.53
FOREST PRODUCTS -1.20% 8.14% 130.59% 7.90% undervalued 82.11% 17.72
MULTI-IND BASIC -2.33% 6.15% 108.01% 9.87% undervalued 98.43% 11.37
TEXTILES 0.32% -1.05% 46.01% 10.94% undervalued 58.65% 10.71
As you can see, we have Metal Fabricators, Precious Metals, and Building and Related
industries leading the way in terms of calculated overvaluation. This means that for our
valuation model, these industries--as well as the sector overall--is mispriced to a high level
based on the pure fundamentals of the underlying equity components if the market were
totally rational and efficient.
Of course, we know that the market is anything but rational and efficient-- if it were, stock
picking would not be much of a challenge. We also know that valuations have been
completed thrown out of whack by the market crash and the ever increasing gap between
analyst estimates and actual earnings. So, it is always useful to take a look at the forecast
figures for our stock universe because they are based on the calculations of our Forecast
Model--which uses valuation data as well as stock price reversal figures to predict how a
given equity will perform in the stock market as it actually exists today.
Below, we provide key ValuEngine data for the top-twenty short and long-term forecast Basic
Industries tickers--we filtered our results by eliminating sector components with Average daily
volumes of less than 100,00 shares/day. We see a mixed picture with some overvalued
stocks, some undervalued stocks, some stocks which aren't even buy-rated, and some which
present all of the factors we look for in an investment target--undervalued, positive short and
long-term forecast figures, decent P/E ratio, good momentum (LTM return).
Top One-Month Forecast Basic Industries Tickers
Next up, we have a top-twenty list of Basic Industries equities ranked according to how we
calculate our buy/sell/hold ratings--market cap, p/e ratio, valuation, forecast, and momentum
(LTM return). In this list, a ticker with a larger market cap would get priority over a smaller
company with better forecast figures--based on the fact that our research has shown that
cutting out smaller firms reduces volatility (albeit with a slight performance penalty.)
Top Composite Score Basic Industries Tickers
Last 12- Forecast Forecast
Mkt Valuation VE Comp P/E
Ticker Name M 1-Month 1-Yr Industry
Price (%) Rating Rank Ratio
Retn(%) Retn(%) Retn(%)
ASH ASHLAND INC 37.69 -21.06 5 147.15 800 1.12 -2.97 11.72 CHEMICALS
OI OWENS ILLINOIS INC 32.97 -20.55 4 73.98 760 0.92 -5.19 11.38 CONTAINERS
AVERY DENNISON
AVY 39.48 -24.54 4 41.86 744 0.87 3.1 18.41 CHEMICALS
CORPORATION
AIR PRODUCTS &
APD 83.81 -16.77 4 67.69 728 0.41 -3.15 20.38 CHEMICALS
CHEMICALS
NONFERROUS
CCJ CAMECO CORP 30.13 -12.82 4 109.97 726 0.44 -4.35 22.93
BASE METALS
FOREST
TIN TEMPLE INLAND INC 17.21 -9.61 4 322.85 722 1.12 -5.31 19.39
PRODUCTS
SEALED AIR
SEE 22.46 -8.28 4 51.25 720 0.13 1.18 15.59 CONTAINERS
CORPORATION
INTERNATIONAL PAPER FOREST
IP 25.54 -3.29 4 128.65 714 0.94 -0.95 29.59
CO PRODUCTS
NLC NALCO HOLDING CO 24.47 -13.72 4 107.55 708 0.14 -3.77 26.34 CHEMICALS
CIA SIDERURGICA
SID 35.57 51.42 4 296.99 708 0.37 -4.97 10.71 STEEL
NACIONAL SA
CCK CROWN HOLDINGS INC 26.07 -2.3 4 62.13 700 0.3 -3.64 13.19 CONTAINERS
PTV PACTIV CORP 23.52 -14.53 4 -3.29 696 0.67 1.64 9.48 CONTAINERS
CE CELANESE CORP 29.4 -15.82 4 134.64 694 0.35 -8.23 26.96 CHEMICALS
STEEL DYNAMICS
STLD 16.62 -31.94 4 135.08 692 0.97 -6.56 N/A STEEL
INCORPORATED
OLN OLIN CORPORATION 17.1 -9.05 4 15.07 686 0.58 5.09 12.1 MULTI-IND BASIC
LZ LUBRIZOL CORPORATION 75.93 41.07 4 141.28 686 0.01 -3.26 11.4 CHEMICALS
CLIFFS NATURAL
CLF 43.04 151.46 3 132.52 662 2.39 15.64 27.4 STEEL
RESOURCES INC
PX PRAXAIR 83.88 -0.92 3 49.44 662 0.12 -3.95 21.26 CHEMICALS
FOREST
LPX LOUISIANA PACIFIC CORP 6.38 -45.33 3 293.83 660 1.29 -8.12 N/A
PRODUCTS
PRECIOUS
NEM NEWMONT MINING CORP 52.7 10.43 3 125.12 658 -0.3 -5.71 25.78
METALS
Finally, we provide a list of the most overvalued Basic Industries tickers. In a "normal"
market, we would be looking for short candidates here--but of course we have many flocking
into Gold and other precious metals and as we saw last week these stocks are garnering
huge gains despite the fact that the underlying fundamentals may not look that good to our
models. It is a tough call when the valuation model finds big overvaluation yet the forecast
model predicts strong returns. Trying to short precious metals is probably not the best bet
right now given the overall market trend and the constant worries of inflation--despite the fact
that many analysts argue we are currently in a deflationary environment..
Most Overvalued Basic Industries Tickers
Forecast Forecast
Mkt Valuation VE Last 12-M P/E
Ticker Name 1-Month 1-Yr Industry
Price (%) Rating Retn(%) Ratio
Retn(%) Retn(%)
BUILDING AND
CX CEMEX SAB DE CV 11.59 221.17 3 153.61 -3.19 -27.47 N/A
RELATED
ALLEGHENY
ATI 34.64 221.41 3 78.19 -3.65 -20.48 39.41 STEEL
TECHNOLOGIES
PRECIOUS
VALE VALE SA 28.76 132.13 3 165.56 -1.63 -14.21 28.59
METALS
CLIFFS NATURAL
CLF 43.04 151.46 3 132.52 2.39 15.64 27.4 STEEL
RESOURCES INC
PRECIOUS
TIE TITANIUM METALS 10.19 134.22 2 50.52 -3.22 -16.27 40.22
METALS
NONFERROUS
TCK TECK RESOURCES LTD 34.85 127 3 591.47 -0.76 -12.59 17.85
BASE METALS
HUN HUNTSMAN CORP 8.86 107.61 2 11.59 -2.36 -16.74 N/A CHEMICALS
NONFERROUS
BHP BHP BILLITON LIMITED 75.8 112.21 3 148.44 -1 -11.52 29.86
BASE METALS
PRECIOUS
IAG IAMGOLD CORPORATION 18.61 97.59 3 514.19 -1.36 -12.97 39.46
METALS
IPI INTREPID POTASH INC 28.95 86.85 3 62.18 -2.2 -14.09 32.48 CHEMICALS
RANDGOLD RESOURCES PRECIOUS
GOLD 83.72 78.8 3 203.11 -1.72 -20.34 115.85
LTD. METALS
PRECIOUS
VALE.P VALE SA 25.03 69.59 N/A 154.37 -1.11 -13.21 24.66
METALS
NOVAGOLD RESOURCES PRECIOUS
NG 5.36 71.62 2 151.64 -3.81 -28.42 N/A
INC METALS
NORTHGATE MINERALS PRECIOUS
NXG 3.16 61.83 3 426.67 -0.91 -12.37 21.4
CORPORATION METALS
TERRA INDUSTRIES
TRA 38.05 64.46 3 156.06 -0.94 -10.83 13.42 CHEMICALS
INCORPORATE
COMPANIA DE MINAS PRECIOUS
BVN 39.55 60.87 3 232.63 -0.56 -12.92 23.36
BUENAVENTURA S METALS
PRECIOUS
EGO ELDORADO GOLD CORP 13.52 56.46 3 198.45 -1.01 -10.11 33.38
METALS
NONFERROUS
CENX CENTURY ALUMINUM 10.26 56.06 3 17.39 1.34 5.53 N/A
BASE METALS
METAL
PRECISION CASTPARTS
PCP 105.25 56.05 3 97.58 -0.66 -7.34 15.51 FABRICATORS
CORP
AND DIST
MOS MOSAIC CO/THE 54.44 52.41 3 74.32 -1.27 -16.55 40.75 CHEMICALS
What's Hot
--The VE Forecast 22 MNS Portfolio Newsletter
We re-balanced our ValuEngine Forecast 22 Market Neutral Strategy Newsletter Portfolio
this week. For October-November, our portfolio posted a slight loss of .46%. Our short side
roughly matched the S&P 500 benchmark with a return of 1.54% while our longs lagged and
posted a loss of 2.01%. Subscribers who heeded Chief Market Strategist Richard Suttmeier's
advice to allocate with a slight short-bias beat the 50/50 MNS allocation by 69 bps and
garnered a slight gain of .25% for the month.
For much of the month, our short-side provided solid gains. The Consumer Services,
Energy, Finance, and Technology Sectors provided double-digit average gains. Microvision
(MVIS) led our shorts with a return of almost 30% followed closely by Western Alliance
Banking (WAL), Melco Crown Entertainment (MPEL), and Hawaiian Holdings (HA)--with gains
of 26.92%, 25.81% and 20.54% respectively. We see again that even when our long-side
performance falters, the shorts step up to reduce volatility and limit losses.
As the markets declined sharply into November, our long side suffered. Our picks in the
high-flying Technology Sector really hurt performance as did our Transportation, Energy, and
Finance Sector picks. The winners on our long side were found in Basic Industries, Health
Care, and Capital Goods. Domtar (UFS) was our overall leader with a return of 26% followed
by Healthspring (HS) 17.14%, Aetna (AET) 14.04%, and Stillwater Mining (SWC) 11.07%.
Below we post our short-side portfolio results:
Entry Price Current
Ticker Company Name Change %Change Sector
10-15-09 Price
MTL MECHEL OAO 21.52 21.82 -0.3 -1.39 BASIC INDUSTRIES
SVM SILVERCORP METALS INC 5.54 6.48 -0.94 -16.97 BASIC INDUSTRIES
GTI GRAFTECH INTERNATIONAL LTD 14.99 15.68 -0.69 -4.60 CAPITAL GOODS
CBI CHICAGO BRIDGE & IRON 19.09 20.33 -1.24 -6.50 CAPITAL GOODS
DAN DANA HOLDING CORP 7.10 7.29 -0.19 -2.68 CONSUMER DURABLES
KBH KB HOME 16.01 15.23 0.78 4.87 CONSUMER DURABLES
BWS BROWN SHOE COMPANY 9.91 11.31 -1.4 -14.13 CONSUMER NON_DURABLES
SFD SMITHFIELD FOODS INC 14.08 17.09 -3.01 -21.38 CONSUMER NON_DURABLES
RRR RSC HOLDINGS INC 7.26 6.51 0.75 10.33 CONSUMER SERVICES
MPEL MELCO CROWN ENTERTAINMENT LTD 6.51 4.83 1.68 25.81 CONSUMER SERVICES
KEG KEY ENERGY SERVICES 9.00 8.20 0.8 8.89 ENERGY
PZE PETROBRAS ENERGIA PARTICIPACIONE 19.40 16.57 2.83 14.59 ENERGY
WAL WESTERN ALLIANCE BANCORP 5.98 4.37 1.61 26.92 FINANCE
COLB COLUMBIA BKG SYS INC 15.64 14.14 1.5 9.59 FINANCE
AMAG AMAG PHARMACEUTICALS INC 36.31 41.92 -5.61 -15.45 HEALTH CARE
TRGT TARGACEPT INC 18.49 20.87 -2.38 -12.87 HEALTH CARE
ENI ENERSIS 18.67 19.44 -0.77 -4.12 PUBLIC UTILITIES
Ticker Company Name Entry Price Current Change %Change Sector
10-15-09 Price
TNE TELE NORTE LESTE PARTICIPACOES 19.95 21.73 -1.78 -8.92 PUBLIC UTILITIES
For a market neutral strategy with significant volatility-reducing benefits, our newsletter
continues to perform remarkably well. In fact, this product has been so successful it was
recently selected by Forbes.com for inclusion into its stable of newsletter
products. Forbes.com believes that the VE Forecast 22 MNS Portfolio offers a sophisticated
newsletter for investors seeking access to hedge fund-type strategies without hefty
performance fees and onerous qualified investor requirements.
Since inception, our portfolio is up 17.13% while the S&P 500 is up 23.10% for the
same time frame. For more on the VE Forecast 22 Market Neutral Strategy Newsletter
Portfolio, Click the Logo Below
Suttmeier Says
--Commentary and Analysis from Chief Market Strategist Richard Suttmeier
Treasuries
The US Treasury will sell $44 billion in 2-year notes on Monday, $42
billion in 5-year notes on Tuesday and $32 billion in 7-year notes on
Wednesday.
Major Indices
The daily chart the Dow is overbought with the 21-day simple moving average at 10,070.
The daily chart the NASDAQ with the 21-day and 50-day converged at 2129 and 2126.
The daily chart for Transports is overbought with the triple top at 4050 and the 21-day and
50-day in negative formation at 3846 and 3883.
The daily chart the Russell 2000 shows the double top at 624 / 625 and the 21-day and 50-
day in a negative configuration at 585 and 599.
The SOX shows the double top at 337 with the21-day and 50-day also negative at 310.78
and 318.04.
Employment
The economy is in Recession as long as jobless claims are above 350,000.
Current Fed Chief Ben Bernanke admits that the economy is still losing jobs, albeit at a
slower pace, but not at a pace to raise the federal funds rate. He repeatedly says that "rates
will stay low for an extended period"-- thus acknowledging that unemployment will remain
high for an extended period. Former Fed Chief Alan Greenspan says that non-farm payrolls
must grow by 100,000/month for several months before the unemployment rate peaks.
For more on the Suttmeier ValuTrader Newsletter Portfolio, Click the Logo Below