May 12, 2015
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VALUATION WATCH: Overvalued stocks now make up 64.33% of our stocks assigned a valuation and 23.53% of those equities are calculated to be overvalued by 20% or more. Sixteen sectors are calculated to be overvalued--with eight at or near double digits.
--Murders and Executions
Telecom Giant Verizon Announces Acquisition Deal for AOL
Verizon Communications (VZ), formed by the merger of Bell Atlantic and GTE, is one of the world's leading providers of high-growth communications services. Verizon companies are the largest providers of wireline and wireless communications in the United States. Verizon is also the world's largest provider of print and on-line directory information.
AOL Inc. (AOL) is a leading global Web services company with an extensive suite of brands and offerings and a substantial worldwide audience. AOL's business spans online content, products and services that the company offers to consumers, publishers and advertisers. AOL is focused on attracting and engaging consumers and providing valuable online advertising services on both AOL's owned and operated properties and third-party websites. In addition, AOL operates one of the largest Internet subscription access services in the United States, which serves as a valuable distribution channel for AOL's consumer offerings.
Just in time to replace the Comcast/Time Warner failed mega deal, comes a new telecom acquisition. Giant telephone and cable provider Verizon announce the acquisition of AOL today. According to the Wall Street journal, "the all-cash deal values AOL at $50 a share, a 23% premium over the company’s three-month volume-weighted average price. AOL shares rose 18% in morning trading to $50.18. Verizon shares fell 1.7% to $48.98."
Of course, given the general state of disdain for AOL amongst the hipster set--with an AOL email address leading to derision and jokes about elderly subscribers still on dial up internet--one wonders what Verizon could possibly be thinking here.
@AOL.com, Not Exactly an Email Address with Cache...
Knowledgeable analysts note that AOL is actually a video powerhouse. The company is ranked behind only YouTube and Facebook in unique video views. The company was also in the top five for unique website visitors in March, 2015.
The company has also made a series of canny acquisitions of its own in the past few years--which include 5min Media and Adap.tv. The video services AOL controls allow for strong ad revenue, which is the holy grail for "free" internet sites. With the AOL deal, there is the potential that Verizon will finally be able to deliver television content to any device. AND this content may now be integrated with a strong targeted-ad service to provide vastly increased revenues.
Thus, this piece of the puzzle, if correctly handled, will allow Verizon to become more than just a telecom utility providing the wires, cell towers, and bandwidth for others. With this purchase, Verizon becomes both a provider of access AND content.
And as they provide that content, they should be able to fully benefit from it with the targeted ad services also possessed by AOL. The purchase provides them a chance to compete with both Google and Facebook. Of course, it remains to be seen whether the company will be able to pull off this holy grail-type quest.
Prior to the announced acquisition, we had a HOLD recommendation on AOL INC . Based on the information we had gathered and our resulting research, we felt that AOL INC had the probability to ROUGHLY MATCH average market performance for the next year. The company exhibited ATTRACTIVE Company Size but UNATTRACTIVE Book Market Ratio.
Prior to the announced acquisition, we had a BUY recommendation on VERIZON. Based on the information we had gathered and our resulting research, we felt that VERIZON COMM had the probability to OUTPERFORM average market performance for the next year. The company exhibited ATTRACTIVE Company Size and Volatility.
As a bonus to our Newsletter readers,
we are offering a FREE DOWNLOAD of one of our Stock Reports
Read our Complete Detailed Valuation Report on Verizon HERE.
Read our Complete Detailed Valuation Report on AOL HERE.
Below is today's data on VZ--the new parent company for AOL:
ValuEngine Forecast |
|
Target
Price* |
Expected
Return |
1-Month |
42.54 |
-0.12% |
3-Month |
42.30 |
-0.69% |
6-Month |
42.19 |
-0.94% |
1-Year |
42.00 |
-1.39% |
2-Year |
44.43 |
4.32% |
3-Year |
38.09 |
-10.56% |
Valuation & Rankings |
Valuation |
5.06% overvalued |
|
53 |
1-M Forecast Return |
-0.12% |
1-M Forecast Return Rank |
43 |
12-M Return |
12.17% |
|
70 |
Sharpe Ratio |
0.31 |
|
66 |
5-Y Avg Annual Return |
10.66% |
5-Y Avg Annual Rtn Rank |
72 |
Volatility |
33.89% |
|
53 |
Expected EPS Growth |
4.68% |
|
34 |
Market Cap (billions) |
3.32 |
Size Rank |
79 |
Trailing P/E Ratio |
24.91 |
|
48 |
Forward P/E Ratio |
23.79 |
Forward P/E Ratio Rank |
25 |
PEG Ratio |
5.32 |
PEG Ratio Rank |
8 |
Price/Sales |
1.29 |
|
61 |
Market/Book |
5.07 |
|
26 |
Beta |
0.95 |
Beta Rank |
51 |
Alpha |
-0.17 |
Alpha Rank |
38 |
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Looking for a monthly portfolio of stock picks which are objective and based on cutting-edge academic theory and Wall St.practice? Then subscribe to The ValuEngine View Newsletter.The ValuEngine View Portfolio is based on our highly-refined and tested ValuEngine Portfolio Strategies along with our proprietary quant-based composite scoring system. The ValuEngine View Newsletter is the product of sophisticated stock valuation and forecast models first developed by Yale Professor of Finance Zhiwu Chen.
The ValuEngine View Newsletter is the product of a sophisticated stock valuation model that was first developed by ValuEngine's academic research team. It utilizes a three factor approach: fundamental variables such as a company's trailing 12-month Earnings-Per-Share (EPS), the analyst consensus estimate of the company's future 12-month EPS, and the 30-year Treasury yield are all used to create a more accurate reflection of a company's fair value. A total of eleven additional firm specific variables are also used. In addition, the portoflio uses top picks from our Forecast Model. In essence, the portfolio is constructed with the best picks from our main propiretary models
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VE View vs. S&P 500 Index Past Five Years |
|
VE View |
S&P 500 |
Ann Return |
24.78% |
14.56% |
Ann Volatility |
22.28% |
12.35% |
Sharpe Ratio |
1.11 |
1.18 |
Sortino Ratio |
1.88 |
1.53 |
Max Drawdown |
-34.94% |
-11.14% |
The ValuEngine View Newsletter is derived from the ValuEngine Aggressive and Diversified Growth BenchmarkPortfolio Strategies. These strategies are the product of ValuEngine's academic research team and combine cutting-edge financial analysis and portfolio construction techniques with real-world Wall St. know how.
CLICK HERE to Subscribe to the ValuEngine View
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 |
35.67% |
Stocks Overvalued |
64.33% |
Stocks Undervalued by 20% |
11.17% |
Stocks Overvalued by 20% |
25.98% |
ValuEngine Sector Overview
|
|
|
|
|
|
|
|
-0.22% |
0.31% |
4.80% |
19.67% overvalued |
-2.60% |
21.02 |
|
0.14% |
1.62% |
6.45% |
5.11% overvalued |
-2.80% |
17.42 |
|
-0.10% |
0.85% |
3.54% |
1.05% overvalued |
-14.14% |
25.11 |
|
0.28% |
0.50% |
6.40% |
9.45% overvalued |
5.01% |
25.97 |
|
0.13% |
1.21% |
5.30% |
13.11% overvalued |
7.37% |
30.65 |
|
-0.24% |
1.19% |
2.16% |
1.14% overvalued |
-0.72% |
24.06 |
|
0.11% |
0.79% |
6.10% |
10.52% overvalued |
-0.01% |
27.10 |
|
-0.11% |
0.56% |
3.52% |
12.72% overvalued |
2.58% |
25.06 |
|
-0.17% |
0.42% |
3.84% |
6.05% overvalued |
3.30% |
17.70 |
|
0.01% |
0.10% |
2.27% |
3.27% overvalued |
-8.32% |
20.36 |
|
0.18% |
0.58% |
10.63% |
18.33% overvalued |
12.45% |
31.74 |
|
-0.32% |
0.31% |
3.79% |
7.87% overvalued |
1.05% |
22.39 |
|
-0.96% |
-2.56% |
4.72% |
10.94% overvalued |
-30.28% |
25.41 |
|
0.22% |
1.81% |
2.25% |
11.59% overvalued |
7.08% |
26.73 |
|
0.11% |
0.89% |
3.30% |
4.26% overvalued |
5.24% |
20.34 |
|
0.06% |
-0.85% |
1.44% |
5.80% overvalued |
-0.40% |
23.55 |
ValuEngine.com Products and Services
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