December 17, 2014

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VALUATION WATCH: Overvalued stocks now make up 45.09% of our stocks assigned a valuation and 12.22% of those equities are calculated to be overvalued by 20% or more. Nine sectors are calculated to be overvalued--with one near double digits.

Skip the Interview?
--Turmoil over Sony Hack Continues

Sony Corporation develops and manufactures consumer and industrial electronic equipment. The Company's products include audio and video equipment, televisions, displays, semiconductors, electronic components, computers and computer peripherals, and telecommunication equipment. The Company is also active in the worldwide music and image-based software markets.

We re-visit the Sony hacking fiasco and associated fallout today. A few weeks ago we featured the company in our weekly as it was one of the latest companies-- joining Target and Home Depot-- "hacked" by a cyber attack. Since the initial news of the catastrophic breach of the company's systems, the turmoil has exceeded that of past incidents for major firms.

In the latest news, the Seth Rogen/James Franco comedy "The Interview", which features an assassination plot against DPRK leader-- and noted film buff-- Kim Jong Un, had its New York City premiere cancelled due to terrorism fears. Executives have also taken the unprecedented step of allowing theater owners to cancel planned showings of the film if they so desire.

These actions were in response to a new round of threats from the hacker group, which included the following: "We will clearly show it to you at the very time and places ‘The Interview’ be shown, including the premiere, how bitter fate those who seek fun in terror should be doomed to . . . Remember the 11th of September 2001.”

According to today's Wall Street Journal, Sony is under pressure from theater owners, malls, and other studios to cancel the film's release altogether due to fears that the threats against "The Interview" may depress movie ticket sales as well as retail activity at shopping centers during the holidays.

This comes on the heels of revelations from the hacked emails that Sony underpays its female actors when compared to males in similar roles/franchises, its executives are sick of Adam Sandler movies, and some of them--eg Chief Amy Pascal--like to make racially-disparaging comments about US President Breack Obama in their private correspondence.

It is still unclear whether North Korea is actually responsible for the hack, but the DPRK remains the number one suspect at this time. Why they have reacted so negatively to this film when Hollywood bad boys Trey Parker and Matt Stone made a mockery of-- then leader of the DPRK and father of Kim Jong Un-- Kim Jong Il years ago in "Team America World Police," remains unclear.

DPRK Hackers Don't Get the Joke?

This latest controversy may hurt or help ticket sales for "The Interview," the effect is not clear yet and the film has not even opened. However, our models have been down on Sony for some time. The hacked emails released so far do not inspire confidence. As of now, ValuEngine continues its STRONG SELL recommendation on SONY CORP ADR for 2014-12-16. Based on the information we have gathered and our resulting research, we feel that SONY CORP ADR has the probability to UNDERPERFORM average market performance for the next year. The company exhibits UNATTRACTIVE P/E Ratio and Sharpe Ratio.

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Read our Complete Detailed Valuation Report on Sony HERE.

Below is today's data on SNE:

ValuEngine Forecast
	Target Price*	Expected Return
1-Month	19.46	-1.29%
3-Month	18.99	-3.69%
6-Month	18.52	-6.07%
1-Year	16.66	-15.52%
2-Year	20.96	6.26%
3-Year	17.57	-10.92%

Valuation & Rankings
Valuation	65.55% overvalued	Valuation Rank(?)	3
1-M Forecast Return	-1.29%	1-M Forecast Return Rank	2
12-M Return	12.69%	Momentum Rank(?)	73
Sharpe Ratio	-0.10	Sharpe Ratio Rank(?)	39
5-Y Avg Annual Return	-3.87%	5-Y Avg Annual Rtn Rank	39
Volatility	39.88%	Volatility Rank(?)	49
Expected EPS Growth	123.04%	EPS Growth Rank(?)	88
Market Cap (billions)	20.46	Size Rank	95
Trailing P/E Ratio	n/a	Trailing P/E Rank(?)	12
Forward P/E Ratio	36.29	Forward P/E Ratio Rank	10
PEG Ratio	0.07	PEG Ratio Rank	88
Price/Sales	0.28	Price/Sales Rank(?)	91
Market/Book	1.36	Market/Book Rank(?)	65
Beta	1.57	Beta Rank	24
Alpha	-0.03	Alpha Rank	61

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	VE View	S&P 500
VE View vs. S&P 500 Index Past Five Years
Ann Return	23.13%	13.25%
Ann Volatility	22.30%	12.20%
Sharpe Ratio	1.04	1.09
Sortino Ratio	1.78	1.39
Max Drawdown	-34.94%	-11.14%

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The ValuEngine View Newsletter portfolio has 15 primary stock picks and five alternates and is re-balanced once each month. The ValuEngine View Newsletter is published near the middle of each calendar month. An equal amount of capital is allocated to each stock. The monthly returns are calculated from the closing prices on date of publication. The performance calculation does not include any transaction costs.

ValuEngine Market Overview

Summary of VE Stock Universe
Stocks Undervalued	54.91%
Stocks Overvalued	45.09%
Stocks Undervalued by 20%	24.54%
Stocks Overvalued by 20%	12.22%

ValuEngine Sector Overview

Sector	Change	MTD	YTD	Valuation	Last 12-MReturn	P/E Ratio
Aerospace	0.24%	-4.67%	-4.78%	9.76% overvalued	0.20%	21.36
Retail-Wholesale	-0.46%	-2.97%	-2.55%	5.47% overvalued	-0.65%	26.70
Consumer Staples	0.45%	-2.90%	2.37%	4.53% overvalued	4.87%	22.65
Medical	-0.70%	-2.42%	13.73%	4.53% overvalued	9.99%	29.89
Consumer Discretionary	-0.27%	-3.75%	-3.76%	4.23% overvalued	-2.81%	27.27
Computer and Technology	-0.38%	-3.66%	2.74%	4.12% overvalued	1.16%	30.54
Multi-Sector Conglomerates	-0.25%	-6.58%	-6.49%	2.69% overvalued	0.25%	16.40
Finance	-0.17%	-2.76%	1.89%	1.86% overvalued	2.30%	17.57
Utilities	0.21%	-3.61%	3.92%	0.42% overvalued	5.34%	20.70
Business Services	0.03%	-3.35%	1.34%	0.05% undervalued	1.54%	25.22
Transportation	-0.58%	-4.60%	7.91%	0.79% undervalued	4.47%	19.91
Auto-Tires-Trucks	-0.21%	-6.15%	-6.64%	4.77% undervalued	-1.70%	16.36
Construction	0.17%	-3.16%	-3.62%	7.42% undervalued	-2.31%	24.60
Industrial Products	-0.11%	-4.26%	-5.85%	8.07% undervalued	-6.51%	19.11
Basic Materials	-0.39%	-5.72%	-9.42%	19.04% undervalued	-12.76%	22.29
Oils-Energy	1.59%	-15.92%	-19.23%	29.70% undervalued	-27.18%	18.44

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