November 9, 2012

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The ValuEngine Weekly is an Investor Education newsletter focused on the quantitative approach to investing and the tools available from ValuEngine.com. 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 www.valuengine.com!

MARKET OVERVIEW

Index
DJIA NASDAQ RUSSELL 2000 S&P 500

Week Open
13092.28 2983.03 814.3 1414.02

Thurs. Close
12811.32 2895.58 793.65 1377.51

Change
-280.96 -87.45 -20.65 -36.51

% Change
-2.15% -2.93% -2.54% -2.58%

YTD
4.57% 11.09% 6.68% 9.32%

Summary of VE Stock Universe

Stocks Undervalued Stocks Overvalued Stocks Undervalued by 20% Stocks Overvalued by 20% 66.39% 33.61% 26.40% 11.38%

SECTOR OVERVIEW
Sector
Aerospace Auto-Tires-Trucks Basic Materials Business Services Computer and Technology Construction Consumer Discretionary Consumer Staples Finance Industrial Products Medical Multi-Sector Conglomerates Oils-Energy Retail-Wholesale Transportation Utilities

Change
-0.81% -1.51% -1.29% -1.01% -0.86% -1.47% -1.43% -0.70% -0.86% -1.26% -1.30% -1.07% -1.96% -1.86% -0.94% -0.88%

MTD
-2.56% 0.91% -2.53% -1.70% -1.26% -0.05% -2.66% -0.46% -1.41% -1.20% -1.12% -2.91% -3.18% -1.78% -1.51% -3.68%

YTD
1.37% 1.65% 2.97% 5.05% 4.13% 106.26% 11.82% 18.71% 28.58% 7.16% 22.15% 9.69% -10.65% 16.70% 9.83% 0.71%

Valuation
1.81% overvalued 9.24% undervalued 1.87% undervalued 1.45% overvalued 0.54% overvalued 12.55% overvalued 5.01% undervalued 11.30% overvalued 6.72% overvalued 3.13% overvalued 5.44% overvalued 9.10% undervalued 4.66% undervalued 5.11% overvalued 5.29% overvalued 3.10% overvalued

Last 12MReturn
0.54% -7.04% -22.98% 4.46% -3.95% 24.04% 3.60% 7.69% 11.22% -1.45% 3.74% 3.87% -16.79% 14.61% -3.27% -1.78%

P/E Ratio
15.13 12.2 32.46 23.5 41.82 44.3 28.13 23.44 18.22 23.77 31.64 13.9 34.93 25.23 23.74 17.67

Sector TalkFinance
Below, we present the latest data on leading Finance stocks 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 volume.

Top-Five Finance Sector Stocks--Short-Term Forecast Returns

Ticker
HCI AIG CRBC OCN RF

Name
HOMEOWNERS CHCE AMER INTL GRP CITIZENS BKNG OCWEN FINL CORP REGIONS FINL CP

Mkt Price
21.35 31.41 17.68 35.37 6.38

Valuation(%)
10.89 -75 -38.98 -4.27 -44.64

Last 12-M Retn(%)

193.27 30.55 70.66 143.26 46.67

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

Ticker
ABCP ASPS OCN HCI NCT

Name
AMBASE CORP ALTISOURCE PORT OCWEN FINL CORP HOMEOWNERS CHCE NEWCASTLE INV

Mkt Price
3.07 111.99 35.37 21.35 8.11

Valuation(%)
N/A 18.43 -4.27 10.89 -12.36

Last 12-M Retn(%)

145.6 161.84 143.26 193.27 94.02

Top-Five Finance Sector Stocks--Composite Score

Ticker
AIG FBC RF AEG WIBC

Name
AMER INTL GRP FLAGSTAR BANCP REGIONS FINL CP AEGON N V WILSHIRE BCP

Mkt Price
31.41 16.2 6.38 5.55 6.05

Valuation(%)
-75 -75 -44.64 -35.22 -36.09

Last 12-M Retn(%)

30.55 113.16 46.67 26.14 76.38

Top-Five Finance Sector Stocks--Most Overvalued

Ticker
RSO PLFE AI FSP TRST

Name
RESOURCE CAPITL PRESIDL LIFE CP ARLINGTON ASSET FRANKLIN ST PPT TRUSTCO BK -NY

Mkt Price
5.7 13.95 20.68 11.16 5.35

Valuation(%)
300 300 300 300 276.8

Last 12-M Retn(%)

22.32 43.96 8.5 0.45 8.52

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Free Download for Readers

This week's free download is our report on JCPenney (JCP). JCPenney is one of America's leading retailers, operating department stores throughout the United States and Puerto Rico, as well as one of the largest apparel and home furnishing sites on the Internet, jcp.com, and the nation's largest general merchandise catalog business. Through these integrated channels, JCPenney offers a wide array of national, private and exclusive brands. Free Weekly Newsletter Subscribers can download a FREE Detailed Valuation Report on JCP HERE. If you have not subscribed and want to be able to receive a FREE $ 25.00 Detailed Valuation Report, you can subscribe to our Free Weekly Newsletter HERE

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What's HotMarket Valuation

It's time for our monthly look at our overall market valuation figures. The ValuEngine Valuation Model tracks more than 8000 US equities, ADRs, and foreign stock which trade on US exchanges. The model calculates a level of mispricing or valuation percentage for each equity based on 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. We use this metric to get an overall snapshot of the market and to discern if stocks are a bargain or overpriced. In the past, the valuation figures have correlated fairly well to market tops and have signaled impending pull backs. Whenever we see overvaluation levels in excess of @ 60% for the overall universe, we issue a valuation watch. We do not have a similar metric for the undervaluation levels, but we generally find that when stocks are calculated to be more than 75% undervalued overall it is time to do some bargain hunting. In the YTD chart below, you can see that our Valuation Model finds that undervaluation has been increasing since September. The market had a nice run up over the Summer, but seems to have peaked and is unable to break out to the upside. We now have 63% stocks calculated to be undervalued and 37% overvalued. This level of undervaluation is just outside of "normal" and is now approaching levels where we begin to see opportunities for bargain hunting. Keep in mind, however, that conditions have been volatile, and we have seen levels fluctuate in and out of normal range with the market's swings. We would be more likely to declare stocks "cheap" if we saw levels like we did back in June when the undervaluation figure hit 80%.

As is typical, in US presidential election years the market posts solid gains over the Summer leading up to the election. However, now that President Obama has been re-elected we notice once again the various storm clouds--Euro zone, "fiscal cliff," deficits, etc. which were on the horizon during the contest. It will take some time to figure out if yesterday's big drop was just a tantrum on the part of disappointed traders or something more sustained. As of right now, we do NOT see conditions that are favorable to a big market dive. QE III seems to have bolstered equities as expected. Good--or at least "better"-news continues to come from the labor, housing, and consumer confidence indices. Oil prices have declined. While some were predicting major dives in earnings, a majority of S&P stocks hit their marks. Due to the election results, President Obama has a mandate for a sensible solution to the US budget impasse which includes a mix of revenue increases and spending cuts. However, it remains to be seen whether or not the two parties will be able to agree on a deal without more political and economic bloodshed. For reference, here is a longer-term chart which tracks the metrics back to March, 2010. Note that undervaluation levels peaked in excess of 90% last Summer--"Sell in May and Go Away"--and we never saw that sort of very high undervaluation level after our pullback in late Spring of this year.

And here is our even longer timeframe chart which tracks things back to 2007 and encompasses the financial crisis.

We will continue to watch and track our valuation metrics so that we may add to our data set.

Suttmeier Says
--Commentary and Analysis from Chief Market Strategist Richard Suttmeier
If you have any comments or questions, send them to Rsuttmeier@Gmail.com Treasury Yields 10-Year--(1.615) Weekly, semiannual, quarterly and annual value levels are 1.803, 1.853, 2.109 and 2.502 with daily, monthly and semiannual risky levels at 1.548, 1.452 and 1.389. The 50-day and 200-day simple moving averages are 1.706% and 1.787%. Commodities and Forex Comex Gold ($1732.2) Semiannual, monthly and annual value levels are $1643.3, $1639.8 and $1575.8 with daily and semiannual pivots at $1711.1 and $1702.5, and weekly and quarterly risky levels at $1739.7 and $1881.4. Set a 2012 high at $1798.1 on October 5. The 50-day and 200-day simple moving averages are $1740.40 and $1666.0.

Nymex Crude Oil ($85.00) Monthly and semiannual value levels are $76.96 and $76.71 with daily and weekly pivots at $85.60 and $84.04, and annual and quarterly risky levels at $103.58 and $107.63. The 50-day and 200-day simple moving averages are $91.27 and $94.72. The Euro (1.2747) My monthly value level is 1.2289 with daily and semiannual pivots at 1.2735 and 1.2917, and quarterly, weekly and annual risky levels at 1.3048, 1.3091 and 1.4239. The 50-day and 200-day simple moving averages are 1.2903 and 1.2822. Major Indices Daily Dow(12,811) Annual and semiannual value levels are 12,312 and 10,738 with daily, monthly, weekly and annual and quarterly risky levels at 12,995, 13,143, 13,401, 14,032 and 14,192. The QE3 high is 13,661.87 on October 5 with the October 2007 high at 14,198.10. The 50-day and 200-day simple moving averages are 13,340 and 12,993. S&P 500 (1377.5) Annual and semiannual value levels are 1363.2 and 1059.7 with daily, monthly, weekly, quarterly and annual risky levels at 1400.6, 1418.7, 1435.3, 1513.3 and 1562.9. The QE3 high is 1474.51 on September 14 with the October 2007 high at 1576.09. The 50-day and 200-day simple moving averages are 1434.3 and 1381.7. NASDAQ (2896) Annual and semiannual value levels are 2698 and 2527 with daily, weekly, annual and semiannual value levels are 2949, 3001, 3028, 3232 and 3295. The QE3 high is 3196.93 on September 21 is well above the November 2007 high at 2861.51. The 50-day and 200day SMAs are 3076 and 2985. NASDAQ 100 (NDX) (2573) Annual and semiannual value levels are 2300 and 2239 with my annual pivot at 2603, and daily, weekly, monthly and quarterly risky levels at 2624, 2665, 2739 and 2950. The QE3 high is 2878.38 on September 21 is well above the November 2007 high at 2239.23. The 50-day and 200day SMAs are 2756 and 2665. Dow Transports (5054) Monthly, weekly, and semiannual value levels are 5053, 5031, 4449 and 4129 with daily, quarterly and annual risky levels at 5177, 5541 and 5861. The QE3 high is 5231.15 on September 14 with the all time high at 5627.85 set on July 7, 2011. The 50-day and 200-day simple moving averages are 5049 and 5132.

Russell 2000 (793.65) My semiannual value level is 686.25 with monthly, daily, weekly, and annual risky levels at 807.15, 807.89, 821.45 and 836.15. The QE3 high is 868.50 on September 14 with the all time high at 868.57 set on May 2, 2011. The 50-day and 200day simple moving averages are 832.18 and 807.47. The SOX (368.80) Weekly, monthly and semiannual value levels are 356.73, 354.06 and 326.30 with daily and quarterly risky levels at 380.96 and 439.97. The QE3 high is 410.82 on September 14 with the July 2007 high at 549.39. The 50-day and 200-day simple moving averages are 382.06 and 394.99. Stock of the Day One of the more popular features of Richard Suttmeier's Morning Briefing for investors is his stock of the day. In every issue, Suttmeier highlights one stock and provides VE data as well as his own proprietary technical data. Here is today's stock of the day from Richard Suttmeier's Morning Briefing Newsletter. Johnson & Johnson (JNJ) ($69.65) is rated a Buy according to ValuEngine with fair value at $68.00, which makes the stock 3.4% overvalued. The ValuEngine one-year price target is $63.16. ValuEngine Profile Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The Company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. Its Consumer segment offers products for use in the baby care, skin care, oral care, wound care, and women's health fields, nutritional and over-the-counter pharmaceutical products. The company's Pharmaceutical segment provides various products in the areas of anti-infective, antipsychotic, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, thrombosis, vaccines, and infectious diseases. Its Medical Devices and Diagnostics segment offers electrophysiology and circulatory disease management products; orthopaedic joint reconstruction, spinal care, neurological, and sports medicine products; surgical care, aesthetics, and women's health products. Johnson & Johnson is based in New Brunswick, New Jersey.

Analysis The daily chart for JNJ shows declining momentum with the stock below its 21-day and 50- day simple moving averages at $70.31 and $69.25 and above its 200day SMA at $66.55. My quarterly value level is $68.76 with an annual pivot at $70.65 and annual risky level at $75.79.

Richard Suttmeier's Morning Briefing, you get daily analysis of US Treasury Yields, Gold, Crude Oil, and Currency Exchange Rates--Dollar, Yen, Pound, and Euro-as well as key technical indicators.

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We provide a variety of means for accessing ValuEngine market analysis and other content. You can find us on some of the leading financial media websites as well as the more popular social media services. While our own website ValuEngine.com provides access to lots of analysis--and you can always sign up to receive email daily and weekly bulletins HERE, some users prefer to download PDF reports of content while others prefer to garner info while browsing the web. =Our Chief Market Strategist Richard Suttmeier is a prolific market observer and you can find his content in a variety of places. His weekly column on Forbes provides insights into his "Buy and Trade" strategy while his daily market analysis can be followed and accessed at Scribd, Twitter, and Minyanville. Senior Editor Steve Hach re-posts PDFs and web-accessible copies of Daily and Weekly ValuEngine bulletins at Seeking Alpha and Scribd. In most cases, you can receive notification of VE content posting by Suttmeier and Hach by following the ValuEngine feed on twitter @ValuEngine. Links for this content are provided below, you may also find these links on our website HERE Intelligent Investing with Richard Suttmeier Articles by Richard Suttmeier | Articles by Steve Hach Newsletters, Articles and Other Research Pieces Articles by Richard Suttmeier | Articles by Steve Hach Get short, timely messages from ValuEngine Inc Daily Bulletin PDFs, Weekly Newsletter PDFs, and PDF Research Reports