July 22, 2016

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VALUATION WATCH: Overvalued stocks now make up 45.63% of our

stocks assigned a valuation and 14.99% of those equities are calculated to
be overvalued by 20% or more. Six sectors are calculated to be
overvalued.
MARKET OVERVIEW
Index

Started week

Friday AM

Change

Change %

ytd

DJIA

18521.55

18372.1

-149.45

-0.81%

5.44%

NASDAQ

5034.99

5091.54

56.55

1.12%

1.68%

RUSSELL 2000

1205.29

1208.63

3.34

0.28%

6.40%

S&P 500

2162.04

2168.95

6.91

0.32%

6.12%

Summary of VE Stock Universe

Stocks Undervalued

54.37%

Stocks Overvalued

45.63%

Stocks Undervalued by 20%

23.00%

Stocks Overvalued by 20%

14.99%

SECTOR OVERVIEW
Sector

Change

MTD

YTD

Valuation

Last 12-M
Return

P/E
Ratio

Aerospace

-0.45%

2.22%

-2.95%

0.45% undervalued

-4.40%

19.1

Auto-Tires-Trucks

0.60%

5.13%

2.38%

15.72% undervalued

-8.96%

12.62

Basic Materials

0.37%

6.49%

46.51%

14.68% overvalued

50.93%

31.12

Business Services

-0.38%

3.72%

14.63%

0.46% overvalued

-4.20%

23.67

Computer and Technology

-0.76%

3.69%

9.29%

1.83% undervalued

-2.25%

29.78

Construction

-0.23%

5.97%

27.17%

0.20% undervalued

2.54%

22.23

Consumer Discretionary

-0.10%

4.49%

7.12%

2.51% undervalued

-6.55%

21.88

Consumer Staples

-0.22%

2.38%

9.88%

8.14% overvalued

7.41%

24.47

Finance

-0.22%

3.19%

4.47%

2.09% undervalued

-1.89%

16.47

Industrial Products

-0.75%

4.55%

10.19%

1.66% overvalued

0.58%

22.71

Medical

-0.01%

5.18%

0.06%

9.62% undervalued

-22.75%

27.8

Multi-Sector Conglomerates

-0.60%

1.97%

6.12%

5.23% overvalued

-0.98%

18.65

Oils-Energy

-0.39%

0.64%

15.00%

2.22% undervalued

-18.70%

24.38

Retail-Wholesale

-0.18%

3.17%

-0.35%

8.57% undervalued

-9.05%

22.2

Transportation

-0.26%

6.30%

7.51%

8.67% undervalued

-24.08%

14.06

Utilities

-0.31%

2.25%

13.28%

6.63% overvalued

9.42%

23.44

Sector TalkFinance
Below, we present the latest data on leading Finance 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 Finance Sector Stocks--Short-Term Forecast Returns

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

ELRC

ELECTRO-RENT

15.49

N/A

49.95%

GGAL

GRUPO GALIC ADR

30.51

N/A

52.63%

LGIH

LGI HOMES INC

34.77

N/A

84.95%

ORC

ORCHID ISLAND

10.91

N/A

26.57%

EIG

EMPLOYERS HLDGS

30.76

-10.22%

30.89%

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

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

ELRC

ELECTRO-RENT

15.49

N/A

49.95%

GGAL

GRUPO GALIC ADR

30.51

N/A

52.63%

LGIH

LGI HOMES INC

34.77

N/A

84.95%

ORC

ORCHID ISLAND

10.91

N/A

26.57%

EIG

EMPLOYERS HLDGS

30.76

-10.22%

30.89%

Valuation

Last 12-M Retrn

Top-Five Finance Sector Stocks--Composite Score

Ticker

Company Name

Market Price

NLY

ANNALY CAP MGMT

10.8

-9.07%

10.54%

EIG

EMPLOYERS HLDGS

30.76

-10.22%

30.89%

GOV

GOVT PPTYS INCM

22.83

-6.17%

19.72%

PRI

PRIMERICA INC

52.33

-11.35%

16.13%

SNH

SENIOR HOUSING

21.71

-1.46%

25.20%

Top-Five Finance Sector Stocks--Most Overvalued

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

AXP

AMER EXPRESS CO

63.43

91.11%

-19.66%

BCS

BARCLAY PLC-ADR

8.06

69.93%

-53.97%

EZPW

EZCORP INC CL A

9.15

59.25%

43.98%

IBKR

INTERACTIVE BRK

34.52

51.11%

-23.20%

DRE

DUKE REALTY CP

27.45

36.95%

39.20%

Find out what Wall Street Investment and Media Professionals already know,
ValuEngine offers sophisticated stock valuation and forecast research as well as a
variety of portfolio screening and creation tools.

What's Hot
Valuations Back Up As Brexit Panic Fades
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 45.6% of the stocks we can assign a valuation are
overvalued and 14.99% of those stocks are overvalued by 20% or more. These
numbers have increased-- slightly-- since we published our valuation study in June-when the overvaluation was at 40%. That last study was published just a week before
the Brexit vote.
Think back to the panic we saw soon after moment, with the doomsayers
screaming that investors should SELL SELL SELL! Yet another illustration of the point that
selling in the midst of crisis is typically the worst possible response for the long-term
investor. At this point, that blip looks like little more than "noise." So, those who sold in
the midst of that Brexit-induced panic locked in their losses.
And the markets in the US and elsewhere certainly shook off that Brexit panic,
with several indices setting new records over the past few weeks. Many analysts
found that the uncertainty in the EU removed any possible scenario where the Fed
would raise rates any time soon. As always, that sort of sentiment provided a boost to
equities.
Of course, that is not to say that some Fed officials don't favor increases, but
the time to hit the brakes may have passed by given the fact that the US is in the
midst of a presidential election, and the central bank is notoriously skittish about any
hint of political bias.
We won't have a better sense of potential rate increases until after the next
round of meetings later this month. If good data for the US and world economy holds
up, the Fed may push for an increase in September. But again, we find that the labor
market should still be given some room to run. As always, and as we repeat like a
mantra, the balancing act between the dual mandate of control inflation and foster
full employment creates tension.

For now, our valuation figures still show a "normal" market, with valuations nowhere
near that bargain level they presented in the immediate aftermath of the Brexit vote.
The chart below tracks the valuation metrics for June and July, 2016. It encompasses
the Brexit sell off. It shows levels in excess of 40%.

The chart below tracks the valuation metrics from July 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
July 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.

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
Twenty-First Century Fox, Inc. (FOX) is involved in creating and distributing media
services. Its business portfolio consists of cable, broadcast, film, pay TV and satellite
assets. Twenty-First Century Fox, Inc., formerly known as News Corporation, is based in
New York, United States.
VALUENGINE RECOMMENDATION: ValuEngine continues its HOLD recommendation
on TWENTY-FIRST CF for 2016-07-21. Based on the information we have gathered and
our resulting research, we feel that TWENTY-FIRST CF has the probability to ROUGHLY
MATCH average market performance for the next year. The company exhibits
ATTRACTIVE Company Size but UNATTRACTIVE Book Market Ratio.
Read our Complete Detailed Valuation Report on Twenty-First Century Fox HERE.

ValuEngine Forecast
Target
Price*

Expected
Return

1-Month

27.67

-0.18%

3-Month

28.06

1.23%

6-Month

28.65

3.36%

1-Year

27.12

-2.16%

2-Year

33.20

19.77%

3-Year

34.37

24.00%

Valuation & Rankings

Valuation

n/a

Valuation Rank(?)

1-M Forecast Return

-0.18%

1-M Forecast Return Rank

35

12-M Return

-15.36%

Momentum Rank(?)

36

n/a

Sharpe Ratio

0.36

Sharpe Ratio Rank(?)

79

5-Y Avg Annual Return

8.20%

5-Y Avg Annual Rtn Rank

77

Volatility

22.69%

Volatility Rank(?)

Expected EPS Growth

25.65%

EPS Growth Rank(?)

Market Cap (billions)

59.09

Size Rank

Trailing P/E Ratio

16.67

Trailing P/E Rank(?)

Forward P/E Ratio

13.26

Forward P/E Ratio Rank

70
63
99
71
65

PEG Ratio

0.65

PEG Ratio Rank

Price/Sales

2.20

Price/Sales Rank(?)

Market/Book

3.80

Market/Book Rank(?)

31

53
42

Beta

1.22

Beta Rank

33

Alpha

-0.19

Alpha Rank

33

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buy/hold/sell recommendations, target price, and valuations on over 7,000
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