December 5, 2013

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Click HERE to Download a FREE Sample of the ValuEngine View Newsletter VAL A!"#N $A!CH% #ur models find that o&er&aluation is at le&els t'picall' seen when market pull(acks occur) #&er&alued stocks assigned a &aluation now make up almost *+, of our uni&erse and -., of the stocks assigned a &aluation are calculated to (e o&er&alued (' /0, or more) 1- of 12 sectors are calculated to (e o&er&alued331- of them (' dou(le digits)

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33Valuations 4ull 5ack65arel'
The ValuEngine Valuation Model tracks more than 8000 US equities, ADRs, and foreign stock hich trade on US e!changes" #hen E$S estimates are a%aila&le for a gi%en equit', our model calculates a le%el of mis(ricing or %aluation (ercentage for that equit' &ased on earnings estimates and hat the stock should &e orth if the market ere totall' rational and efficient))an academic e!ercise to &e sure, &ut one hich allo s for useful com(arisons &et een equities, sectors, and industries" Using our Valuation Model, e can currentl' assign a VE %aluation calculation to more than *+00 stocks" #e com&ine all of the equities ith a %aluation calculation to track market %aluation figures and use them as a metric for making calls a&out the o%erall state of the market" T o factors can lo er these figures)) a market (ull&ack, or a significant

rise in E$S estimates" #hene%er e see o%er%aluation le%els in e!cess of , +-. for the o%erall uni%erse and/or 01. for the o%er%alued &' 00. or more categories, e issue a %aluation arning" #e issued our latest %aluation arning on Ma' 8th" At that time, the S2$ as at 3+0-" As of 'esterda'4s close, e no calculate that 85. of stocks are o%er%alued and -0. stocks are o%er%alued &' 00. or more" These are 6ust &elo the high of 8+"0-. from a fe da's ago" 7ifteen of si!teen sectors are no calculated to &e o%er%alued))3- of them &' dou&le)digit margins" Since our last u(date 8asic Materials has sli((ed &ack into under%alued territor'))al&eit 6ust &arel'" 9ere is our latest data: The chart &elo tracks the %aluation metrics from ;anuar' 003*"

This chart sho s o%erall uni%erse under and o%er %aluation in e!cess of -0. %s the S2$ -00 from ;une 0030

This chart sho s o%erall uni%erse under and o%er %aluation in e!cess of -0. %s the S2$ -00 from March 0001

<f course, e recentl' summari=ed our %ie s of the o%erall market conditions and noted that e see lots of (ositi%e indicators for equities" As is so often the case hen one tries to (redict the future, Mr" Market res(onded to our ell)reasoned anal'sis &' taking a di%e o%er the (ast fe da's" #e %ie this as a > o&&le,> not the &eginnings of a >correction"> <%er the (ast 10 'ears or so, there ha%e &een 01 >corrections>))defined as market declines of 30. or more, and t el%e full)on >8ear Markets>)) hich are defined as declines of 00. or more" <n a%erage these market declines last around three months ith total declines of thirteen (ercent" ?n other ords, 8ut Markets can last a good long time des(ite minor di(s and o&&les" #hen e take a look at our real time data, e find that the market has had three corrections since the satanic +++ S2$ &ottom of March, 000@" ?n the S(ring of 0030, there as a 3+. dro(" ?n the Summer of 0033, e had another correction in hich the dro( as 00. and man' (redicted an im(ending 8ear Market" There as also a di( in S(ring 0030 of almost 30." #e ha%e real)time tracking &ack to 0001 and &acktest data &ack to 0000 in the current dataset Aand older data dated &ack to 3@@0"B #hen it comes to the (ast si! 'ears, our o%er%aluation atches and arnings ha%e coincided ith %arious di(s and full)on corrections in most cases" ?f e take a look at conditions &efore the financial crisis, e sa o%er%aluation le%els in e!cess of +-.)) as e!(ected" #e also had a Valuation #atch (rior to the S(ring 0030 (ull &ack, and a Valuation #arning (rior to the more significant 0033 correction" #e did, ho e%er, miss the 0030 di(" So, our o%er%aluation calculations (ro%ided an accurate signal for three out of four cases o%er the (ast si! 'ears" This reminds us that our data set is sim(l' to short to &e (erfectl' accurate" #hile e don4t see an' other immediate factors necessitating a rethink of our &ullish outlook, hen anal'sts and in%estors suddenl' ake u( in unison and agree that things are looking u(, it is time to &e e!tra ar'" <ur immediate concern remains the US Congress" The rum&lings of 'et another &udget/de&t limit sho do n are alread' occurring in #ashington DC" #hile &oth (arties all claim to ha%e learned a lesson from the recent shut do n)) hich is idel' %ie ed as a disaster for the D<$)) one onders if this go around ill &e resol%ed ithout the &rinksmanshi( and threat of de&t default" #e ha%e heard so much a&out >uncertaint'> hen it comes to the <&ama Administration, 'et some of those same critics re%el in negotiating >strategies> ith onl' ser%e to chi( a a' at the full faith and credit of the US Do%ernment" Eet4s ho(e the so)called >adults> in #ashington ha%e learned from the (ast fe months and that the' refrain from an' more tantrums" #e ha%e ra(idl' falling short) term deficits thanks to the reco%er' and sequestration, an e%er im(ro%ing la&or market, and signs of real reco%er' all o%er the ma("

?n the case of our latest Valuation #arning, e ha%e found o%erheated conditions for se%en months no " ?n that time, the market has (o ered u( to un(recedented le%els" #e thus remind in%estors once again that no is no time to get com(lacent" 8ut hat does that meanF ?t does G<T mean 'ou should dum( all stocks and mo%e 300. into cash" ?t means setting some (rudent sto( le%els for 'our current (ortfolio to guard against an' &ig dro(s))although >(rudent> these da's is difficult to define" 7or our ne sletters, e run alternate scenarios ith sto( le%els of 3-." 7or the (ast se%eral 'ears these ha%e not &oosted (erformance ith an' regularit'" That suggests the' are too tight for the le%el of %olatilit' hich is >normal> these da's" #e also suggest a re)e%aluation of 'our (ortfolio here&' 'ou lock in gains and re&alance in search of %alue" <f course, that is also difficult hen almost e%er' sector is calculated to &e o%er%alued &' 00. or more" Do 'ou reall' ant to &e dum(ing mone' into (recious metals right no F That is (rett' much the onl' (lace our model still finds lots of under%aluation" 9o e%er, ?f e run an ad%anced screen for stocks that are calculated to &e under%alued ith (ositi%e forecasts and momentum, e find indi%idual tickers across the uni%erse" 9ere is a a to()fi%e list from such a screen ranked &' short)term forecast figures" Al a's (erform 'our o n due diligence on screening results, and atch out for the outliers Alike AMDB: Forecast 7kt Valuation Last 1/37 137onth 4rice 8,9 Retn8,9 Retn8,9
3.57 5.1 18. 3 56.15 15.4 -33.89 -36.14 -3 .85 -15.1 -11.!9 57.96 51.93 !. 113.4 35.8 5.54 1.59 !.95 !.9 !.86

!icker
A7D !N4 A <L =C#R S4LS

Name
ADV MICRO DEV TSAKOS EGY NAVG AU"ILIUM PHARMA #UESTCOR PHARMA STAPLES INC

Forecast 4;E 13:r Ratio Retn8,9

43.53 19.!3 11.38 11.!5 1!.37 N/A N/A !. 6 11. 7 11.85

Sector
COMPUTER AND TECHNOLOGY TRANSPORTATION MEDICAL MEDICAL RETAIL-$HOLESALE

Investors are reminded to remain cautious against a move to the downside. Keep a close eye on the market, set some stop losses to preserve gains, and consider booking some profits. Su(scri(ers >et F LL ACCESS to our 7arket and Sector #&er&iews

Market Overview
Summar' of VE Stock ni&erse
Stocks Stocks nder&alued nder&alued (' /0, 15.87% 84.13% 6.17% 5 .43% Stocks #&er&alued Stocks #&er&alued (' /0,

Sector Overview
Sector
Aerospace Auto3!ires3!rucks 5asic 7aterials 5usiness Ser&ices Computer and !echnolog' Construction Consumer Discretionar' Consumer Staples Finance "ndustrial 4roducts 7edical 7ulti3Sector Conglomerates #ils3Energ' Retail3$holesale !ransportation tilities

Change
-!. 1% -!. 6% !.6 % -!.54% -!.14% -!.! % !.16% -!.53% -!.1 % -!.39% -!.48% -!.3 % -!.17% -!.59% !.! % -!.!4%

7!D
-1.58% -1.59% -1. %

:!D
36.5 % 47.4 % 8.6 % 34.96% 44.85% 36.!7% 41.15% 7.77% 6.88% 4!.75% 4 .5!% 15.4 % 4.33% 39.14% 34.65% 17.55%

Valuation
5.79% &'()'*+,(6.73% &'()'*+,(!.69% ,.-()'*+,(7.58% &'()'*+,(8.34% &'()'*+,(16.18% &'()'*+,(7.99% &'()'*+,(4.! % &'()'*+,(.44% &'()'*+,(5.!3% &'()'*+,(9.1!% &'()'*+,(35.6!% &'()'*+,(1 .7 % &'()'*+,(5.36% &'()'*+,(5.48% &'()'*+,(1 .34% &'()'*+,(-

Last 1/3 7Return

47.8!% 49.44% - 4.16% 39.3 % 35.5!% 3!.7!% 4 .6 % 4.8 % 17.17% 4!.14% 39.39% 4.5 % 16.!6% 38.36% 44.7 % 15.75%

4;E Ratio
17.7 19.93 !. 5.6 31.17 5.17 8.43 3. 8 17.94 3.3 9.!5 19.78 6.!3 4.48 1.84 19.85

-1.81% -!.96% - .1!% -1.45% -1.31% -1.!6% -1.5!% -!.97% -1. 4% -1.!!% -1.9!% -1. 6% -1. 6%