February 5, 2016

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VALUATION WATCH: Overvalued stocks now make up 25.8% of our stocks

assigned a valuation and 7.6% of those equities are calculated to be
overvalued by 20% or more. One sector is calculated to be overvalued.
MARKET OVERVIEW
Index

Started week

Friday PM

Change

Change %

ytd

DJIA

16453.63

16165.6

-288.03

-1.75%

-9.30%

NASDAQ

4587.59

4358.66

-228.93

-4.99%

-7.79%

RUSSELL 2000

1033.53

992.24

-41.29

-0.90%

-17.64%

S&P 500

1936.94

1876

-60.94

-3.15%

-8.88%

Summary of VE Stock Universe

Stocks Undervalued

74.19%

Stocks Overvalued

25.81%

Stocks Undervalued by 20%

39.08%

Stocks Overvalued by 20%

7.61%

SECTOR OVERVIEW
Sector

Change

MTD

YTD

Valuation

Last 12-M
Return

P/E
Ratio

Aerospace

-0.01%

-1.02%

-9.29%

8.70% undervalued

-16.68%

19.84

Auto-Tires-Trucks

1.27%

-1.73%

-9.89%

23.53% undervalued

-23.79%

10.82

Basic Materials

2.79%

3.31%

-5.05%

17.90% undervalued

-26.07%

22.36

Business Services

0.04%

-1.94%

-6.87%

6.56% undervalued

-11.54%

21.42

Computer and Technology

0.95%

-0.88%

-5.04%

8.68% undervalued

-9.22%

26.63

Construction

0.81%

-0.94%

-8.80%

16.92% undervalued

-14.22%

17.45

Consumer Discretionary

0.22%

-0.65%

-6.57%

15.59% undervalued

-11.10%

23.3

Consumer Staples

-0.34%

-1.42%

-3.91%

0.10% overvalued

-5.61%

22.89

Finance

0.41%

-1.33%

-7.89%

11.62% undervalued

-9.59%

15.21

Industrial Products

1.66%

0.05%

-6.84%

10.31% undervalued

-15.33%

16.86

Medical

0.42%

-0.80%

-12.56%

18.41% undervalued

-17.33%

25.62

Multi-Sector Conglomerates

0.77%

-1.90%

-9.10%

6.97% undervalued

-16.72%

15.41

Oils-Energy

1.42%

-1.21%

-9.11%

15.87% undervalued

-41.99%

19.93

Retail-Wholesale

0.20%

-0.65%

-7.25%

18.55% undervalued

-17.03%

22.59

Transportation

1.71%

-0.12%

-8.38%

19.05% undervalued

-30.60%

11.73

Utilities

0.16%

-0.11%

-2.29%

0.00% undervalued

-8.30%

21.42

Sector TalkOils/Energy
Below, we present the latest data on leading Oils/Energy Sector stocks from our
Professional Stock Analysis Service. We applied some basic liquidity criteria--share
price greater than $3 and average daily volume in excess of 100k shares. We have
been following the sector closely of late because it has been correlated so tightly to
overall equity price moves.

Top-Five Oils/Energy Sector Stocks--Short-Term Forecast Returns

Ticker

Company Name

Market Price

Valuation(%)

Last 12-Mon
Retn(%)

BAK

BRASKEM SA

12.53

N/A

34.59%

PZE

PETROBRAS EGY

6.18

N/A

17.49%

NTI

NORTHERN TIER

24.71

-4.21%

11.41%

VLO

VALERO ENERGY

61.79

-12.28%

13.81%

ALDW

ALON USA PTNRS

18.07

-7.23%

10.05%

Top-Five Oils/Energy Sector Stocks--Long-Term Forecast Returns

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

BAK

BRASKEM SA

12.53

N/A

34.59%

PZE

PETROBRAS EGY

6.18

N/A

17.49%

NTI

NORTHERN TIER

24.71

-4.21%

11.41%

VLO

VALERO ENERGY

61.79

-12.28%

13.81%

ALDW

ALON USA PTNRS

18.07

-7.23%

10.05%

Top-Five Oils/Energy Sector Stocks--Composite Score

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

VLO

VALERO ENERGY

61.79

-12.28%

13.81%

TSO

TESORO CORP

79.79

-27.07%

-6.36%

JASO

JA SOLAR HOLDGS

8.75

-40.49%

2.34%

PBF

PBF ENERGY INC

31.08

-13.27%

10.60%

JKS

JINKOSOLAR HLDG

20.96

-20.45%

3.25%

Top-Five Oils/Energy Sector Stocks--Most Overvalued

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

EPE

EP ENERGY CP-A

3.59

291.99%

-71.03%

PBR

PETROBRAS-ADR C

3.43

112.77%

-52.75%

CRR

CARBO CERAMICS

16.99

104.75%

-50.18%

SYRG

SYNERGY RES CP

5.97

77.95%

-48.13%

GLF

GULFMARK OFFSHR

3.38

72.73%

-83.47%

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we are offering a FREE DOWNLOAD of one of our Stock Reports
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Read our Complete Detailed Valuation Report on Twitter HERE.

ValuEngine Forecast
Target
Price*

Expected
Return

1-Month

16.77

-0.80%

3-Month

16.62

-1.72%

6-Month

16.26

-3.84%

1-Year

15.29

-9.60%

2-Year

16.21

-4.16%

3-Year

17.52

3.58%

Valuation & Rankings

Valuation

n/a

Valuation Rank(?)

1-M Forecast Return

-0.80%

1-M Forecast Return Rank

12-M Return

-58.47%

Momentum Rank(?)

n/a
9
12

Sharpe Ratio

-0.72

Sharpe Ratio Rank(?)

21

5-Y Avg Annual Return

-41.82%

5-Y Avg Annual Rtn Rank

20

Volatility

58.38%

Volatility Rank(?)

Expected EPS Growth

27.11%

EPS Growth Rank(?)

Market Cap (billions)

10.73

Size Rank

Trailing P/E Ratio

n/a

Trailing P/E Rank(?)

Forward P/E Ratio

n/a

Forward P/E Ratio Rank

PEG Ratio

0.93

PEG Ratio Rank

Price/Sales

5.40

Price/Sales Rank(?)

Market/Book

3.57

Market/Book Rank(?)

Beta

1.38

Beta Rank

Alpha

-0.77

Alpha Rank

30
65
92
25
n/a
42
15
29
26
5

What's Hot-Valuations Remain Low Due To Market Pullback

ValuEngine tracks more than 7000 US equities, ADRs, and foreign stock which
trade on US exchanges as well as @1000 Canadian equities. When EPS estimates are
available for a given equity, our model calculates a level of mispricing or valuation
percentage for that equity based on earnings estimates and 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. Using our Valuation Model, we can currently assign a VE valuation
calculation to more than 2800 stocks in our US Universe.
We combine all of the equities with a valuation calculation to track market
valuation figures and use them as a metric for making calls about the overall state of
the market. Two factors can lower these figures-- a market pullback, or a significant
rise in EPS estimates. Vice-versa, a significant rally or reduction in EPS can raise the
figure. Whenever we see overvaluation levels in excess of @ 65% for the overall
universe and/or 27% for the overvalued by 20% or more categories, we issue a
valuation warning.
We now calculate that 25.8% of the stocks we can assign a valuation are
overvalued and 7.61% of those stocks are overvalued by 20% or more. These numbers
have decreased significantly since the beginning of the year--when we saw

overvalued stocks making up closer to 40% of the overall total. We are now showing
stocks that are cheaper from our Valuation Model's perspective than we have seen
since July, 2012 when the S&P 500 was trading at 1337. According to our model's
perspective, stocks are cheap right now.
2016 is off to challenging start for investors. Falling oil prices, uncertainty about
China, and Fed moves on rates have pushed stock prices down to levels not seen for
a while. We have also seen a spate of poor results from companies as varied as
Boeing, Apple, and Exxon-Mobil. Bargain hunting is always good, but no one wants to
"catch a falling knife."
Looking ahead, we don't see much on the horizon to make the Fed follow
through on their plan raise rates again in the near future. That is good news. We also
believe that the recent slight weakening of the dollar will bolster some of the business
upon which the big international players depend. But the Chinese issue and the
continuing carnage in the oil markets are wreaking havoc with sentiment and
investor confidence.
We are in a presidential election year, which is often a good thing for the
market, but we aren't sure if that maxim will hold this year given the fair amount of
bad news floating around out there. As we noted last month, 2016 is proving to be a
bit of a downer so far with investors selling off positions and increased volatility rearing
its head once again.
The chart below tracks the valuation metrics from February 2015. It shows levels in
excess of 40%.

This chart shows overall universe over valuation in excess of 40% vs the S&P 500 from
February 2013

This chart shows overall universe under and over valuation in excess of 40% vs the S&P
500 from March 2007*

*NOTE: Time Scale Compressed Prior to 2011.

ValuEngine Capital Is Now Autotrading Our

Strategies
We are pleased to announce that ValuEngine Capital has begun trading for
our clients. ValuEngine Capital, a registered investment advisory firm, offers our clients
investment-management services based on industry-leading ValuEngine research.
ValuEngine Capital melds the cutting-edge financial theory of ValuEngine's awardwinning quantitative independent research with the best real-world Wall St. practices.
ValuEngine Capital offers refined investment portfolios for investors of all risk-reward
profiles.
ValuEngine Capital is offering two investment strategies to clients, the
ValuEngine View Strategy and the ValuEngine Market Neutral Strategy.
ValuEngine View Strategy: The ValuEngine View Strategy is the product of a
sophisticated stock valuation model that was first developed by
ValuEngine's academic research team. It utilizes a three factor approach:
fundamental variables such as a company's trailing 12-month Earnings-PerShare (EPS), the analyst consensus estimate of the company's future 12month EPS, and the 30-year Treasury yield are all used to create a more
accurate reflection of a company's fair value. A total of eleven additional
firm specific variables are also used. The ValuEngine View portfolio is
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Valuation Model--and Diversified Growthbased on the Forecast Model-Portfolio Strategies.
The ValuEngine View Strategy is constructed by integrating this model along
with some basic rules for market capitalization and industry diversification.
The portfolio has 15 stocks and is rebalanced once each month.
Automatically Trade Our Portfolio Strategies ValuEngine Market Neutral
Strategy: The ValuEngine Market Neutral Strategy is the product of
ValuEngine's Forecast Model. This model was developed by a team of PhD's
and is based on the cutting edge economic theories of Wall Street
professionals and Ivy League academics. We carefully examine dozens of
fundamental and technical factors for over 8,000 individual stocks,

synthesize the data, and then come up with a sector-diverse list of our best
and worst forecast 1-month return stocks. Short and long-term historic
factors in the VE Forecast model's calculation include past-valuation levels
of the stock and its recent price-momentum factor relative to other stocks.
The ValuEngine Market Neutral Strategy utilizes Forecast Model outputs
along with market capitalization, price, and sector diversification rules to
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short sides.

Please contact us if you would like to put the power of ValuEngine to work
for you at our new full-service money management firm-ValuEngine Capital
For more information, please contact us by email at
info@ValuEngineCapital.com or by phone at (407) 308-5686.

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