August 21, 2015

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VALUATION WATCH: Overvalued stocks now make up 42.34% of our

stocks assigned a valuation and 13.45% of those equities are calculated to
be overvalued by 20% or more. Four sectors are calculated to be
overvalued--with one at or near double digits.
MARKET OVERVIEW
Index

Started week

Friday PM

Change

Change %

ytd

DJIA

17472.66

16694.6

-778.06

-4.45%

-6.33%

NASDAQ

5032.34

4784.44

-247.9

-4.93%

1.22%

RUSSELL 2000

1209.24

1166.38

-42.86

-3.54%

-3.18%

S&P 500

2089.7

2000.68

-89.02

-4.26%

-2.83%

Summary of VE Stock Universe

Stocks Undervalued

57.66%

Stocks Overvalued

42.34%

Stocks Undervalued by 20%

23.75%

Stocks Overvalued by 20%

13.45%

SECTOR OVERVIEW
Sector

Change

MTD

YTD

Valuation

Last 12-M
Return

P/E
Ratio

Aerospace

-1.71%

-4.09%

-0.16%

9.01% overvalued

-4.61%

20.94

Auto-Tires-Trucks

-2.38%

-4.44%

-5.01%

9.57% undervalued

-14.26%

15.09

Basic Materials

-0.70%

-1.37%

-12.87%

17.63% undervalued

-34.44%

21.6

Business Services

-1.61%

-3.57%

1.34%

2.87% overvalued

-4.65%

23.57

Computer and Technology

-2.57%

-4.14%

-4.15%

3.18% undervalued

-6.17%

28.64

Construction

-1.42%

-1.18%

1.61%

6.72% undervalued

-1.88%

23.69

Consumer Discretionary

-2.14%

-3.36%

3.30%

1.25% undervalued

-4.19%

27.55

Consumer Staples

-1.51%

-4.12%

-2.46%

3.76% overvalued

-3.68%

22.53

Finance

-1.42%

-2.70%

-0.57%

1.40% undervalued

-3.06%

17.09

Industrial Products

-1.99%

-4.83%

-6.20%

8.00% undervalued

-12.38%

18.6

Medical

-2.70%

-5.56%

9.22%

6.84% overvalued

8.71%

31.33

Multi-Sector Conglomerates

-1.68%

-5.46%

-6.43%

3.05% undervalued

-7.44%

22.19

Oils-Energy

-2.41%

-9.70%

-20.61%

21.14% undervalued

-48.74%

22.37

Retail-Wholesale

-2.01%

-4.23%

-5.02%

0.15% undervalued

0.65%

24.01

Transportation

-2.37%

-6.74%

-9.16%

10.28% undervalued

-13.27%

16.27

Utilities

-1.68%

-3.26%

-6.00%

1.98% undervalued

-7.30%

20.89

Sector TalkConstruction
Below, we present the latest data on leading Construction Sector stocks from
our Professional Stock Analysis Service. These results were filtered by market price and
volume--no results below 3$/share or less than 100k shares/day volume.

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

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

BLD

TOPBUILD CORP

32.71

N/A

N/A

EFOI

ENERGY FOCUS IN

17.13

N/A

289.32%

LYTS

LSI INDUSTRIES

8.97

N/A

30.38%

RYL

RYLAND GRP INC

46.14

-0.85%

24.27%

TMHC

TAYLOR MORRISON

21.27

N/A

4.01%

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

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

BLD

TOPBUILD CORP

32.71

N/A

N/A

EFOI

ENERGY FOCUS IN

17.13

N/A

289.32%

LYTS

LSI INDUSTRIES

8.97

N/A

30.38%

RYL

RYLAND GRP INC

46.14

-0.85%

24.27%

TMHC

TAYLOR MORRISON

21.27

N/A

4.01%

Top-Five Construction Sector Stocks--Composite Score

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

LEN

LENNAR CORP -A

RYL

RYLAND GRP INC

54.33

1.37%

39.31%

46.14

-0.85%

24.27%

MTH

MERITAGE HOMES

44.05

-13.21%

4.73%

THO

THOR INDS INC

55.38

-15.18%

2.52%

CBI

CHICAGO BRIDGE

45.33

-31.63%

-27.33%

Top-Five Construction Sector Stocks--Most Overvalued

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

EXP

EAGLE MATERIALS

80.89

44.07%

-17.75%

IBP

INSTALLED BUILD

28.2

30.94%

121.52%

DY

DYCOM INDS

64.21

24.10%

118.92%

MLM

MARTIN MRT-MATL

166.95

21.89%

29.21%

WMS

ADV DRAINAG SYS

28.29

21.49%

64.76%

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Free Download for Readers

As a bonus to our Free Weekly Newsletter subscribers,
we are offering a FREE DOWNLOAD of one of our Stock Reports
Chevron (CVX) is the fifth-largest integrated energy company in the world.
Headquartered in San Ramon, California, and conducting business in approximately
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VALUENGINE RECOMMENDATION: ValuEngine continues its HOLD
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Read our Complete Detailed Valuation Report on Chevron HERE.

ValuEngine Forecast
Target
Price*

Expected
Return

1-Month

79.23

-0.02%

3-Month

80.36

1.42%

6-Month

81.21

2.49%

1-Year

79.08

-0.20%

2-Year

76.78

-3.10%

3-Year

94.09

18.74%

Valuation & Rankings

Valuation

10.67% undervalued

Valuation Rank(?)

1-M Forecast Return

-0.02%

1-M Forecast Return Rank

12-M Return

-37.85%

Momentum Rank(?)

Sharpe Ratio

0.16

Sharpe Ratio Rank(?)

62

5-Y Avg Annual Return

2.99%

5-Y Avg Annual Rtn Rank

59

Volatility

18.54%

Volatility Rank(?)

Expected EPS Growth

-31.19%

EPS Growth Rank(?)

Market Cap (billions)

149.80

Size Rank

Trailing P/E Ratio

13.68

Trailing P/E Rank(?)

Forward P/E Ratio

19.88

Forward P/E Ratio Rank

PEG Ratio

n/a

PEG Ratio Rank

Price/Sales

0.85

Price/Sales Rank(?)

Market/Book

0.99

Market/Book Rank(?)

Beta

1.11

Beta Rank

Alpha

-0.47

Alpha Rank

62
49
24

77
11
100
79
32
n/a
70
76
39
18

What's Hot
Valuations Dip On Chinese Pull Back
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 42.34% of stocks are overvalued and 13.45% of those
stocks are overvalued by 20% or more. These figures have been decreasing over the
summer as the market has been volatile and subjected to some battering from
events in the Eurozone, Greece, and--now--China. We have also seen a big hit for oil
prices and Apple shares (whose stock price can have a disproportionate effect on
key indices.)
The markets took a fairly large hit this week, with price declines for major indices
putting in their worst performance since 2011. Still, even with the dip this week--@3.5
to 5% so far for the Dow, SP500, Nasdaq, and Russell 2000 as of this writing, stocks are
only down @5% average across those indices for the year. We have had such a
boom market for so long that a week of bad news can have too much of an impact.
Keep in mind that we haven't even hit the 10% level necessary to call this a
"correction" yet.
We did our last valuation study on June 25th, and with many stocks putting in
some of that "Sell In May and Go Away" price action, valuation levels have declined
significantly from levels in excess of 68% or so on June 24th to the current "normal"
range of @50%. We have seen a decline to today's 42%, and you would have to go
all the way back to early February--with the S&P 500 trading at 2020-- to find stocks
that cheap.

As always, the key part of the puzzle for US equity prices remains the Fed and
how they will end the era of quantitative easing. "September" has been the response
for quite some time now, but events keep interfering with the best efforts of US central
bankers to get back to a "normal" interest rate environment.

China's long-demanded (be careful what you wish for!) currency devaluation
and their market pull back has sent shock waves throughout the global financial
system. This hurts stock prices in the US, but--paradoxically, it helps bolster than too as
it becomes difficult to imagine the Fed making any move higher rates in a period of
global uncertainty.

Meanwhile, the domestic economic picture remains solid. Good news on the
employment front, some indication of wage pressures, signs of a pop in housing?,
lower oil prices, and--now--the possibility of cheaper Chinese goods thanks to the
currency devaluation.

That should go a long way in assuaging fears of inflation on the part of the Fed-and again lowers the possibility of some rapid rate-rise in the Fall. As long as they fulfill
their promise to pay attention to BOTH sides of their mandate--manage inflation AND
promote full employment, they should be able to keep their foot on the pedal for a
while longer.

And again, US equities remain standing as the last bastion of decent yield for
scared investors the world over. As we have been saying for a while now, we remain
confident that the underlying US economy is strong-- and getting stronger. However,
we live in an interconnected world and China has a cold. Therefore, we remain
convinced that the Fed will raise rates later rather than sooner, and US stocks should
benefit from this environment as long as the crises in other areas don't become
unmanageable.
Subscribers Get FULL ACCESS to our Market and Sector Overviews

The chart below tracks the valuation metrics from January 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
January 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.

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ValuEngine Signs New Distribution Deal With

ResearchPool
UK-based financial technology start-up ResearchPool Limited has welcomed
US-based stock valuation and forecasting service ValuEngine to its innovative online
financial research and market-commentary aggregation platform.
ValuEngine brings coverage of more than 4,300 US stocks, including ADRs and
foreign stocks that trade on US markets, to the platform. This extends the
ResearchPool coverage to the US-based NYSE, NASDAQ and OTC markets.
ValuEngine specializes in fundamentals-driven quant-based research. Their stock
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These reports will be available on a pay-as-you-go basis via ResearchPools
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ValuEngines objective and timely stock reports. ResearchPool now features highquality coverage from 23 different research providers. With the addition of
ValuEngine, our stock coverage includes more than 5,200 companies whose shares
trade on 42 markets.

ValuEngine CEO Paul Henneman stated that ResearchPool is an innovative

service designed to provide quick and easy access to market commentary. We view
ResearchPool as an important partner as we expand our report distribution to include
European investors. We are excited to join with ResearchPool as their platform reflects
our own commitment to provide timely, accurate, and objective financial research
to investors across the globe.
ValuEngine.com is an independent research provider, producing buy/hold/sell
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