July 15, 2015

VALUATION WATCH: Overvalued stocks now make up 60.81% of our stocks assigned a valuation and 23.82% of those equities are calculated to be overvalued by 20% or more.  Twelve sectors are calculated to be overvalued--with eight at or near double digits.

Editor's Note: Due to travel, from July 15th-July 27th our free newsletters will be on a reduced publication schedule. There will be no free weekly newsletters. Free daily's will be published fewer times per week. Normal publication schedules will resume July 27th.

--Winning

VE Forecast Market Neutral Newsletter Shrugs Off Grexit and China Turmoil, Posts Another Strong Pick Up

It's back to our winning ways for the ValuEngine Forecast 16 Market Neutral Strategy Newsletter June/July was a great month for our portfolio as volatility and uncertainty allowed our balanced approach to shine. We posted a gain of 5.26% and beat both the SP500 loss of 1.02% and the MLSAX loss of 1.25%. That's a beat of 651 bps! The modified stop-lossed strategy with a suggested 70-30 allocation trailed the standard market neutral allocation with a gain of 1.21%. The trailing 12 month percentage return is 21.85% for the newsletter and 5.46% for the MLSAX Long-Short Fund—and 6.4% for the SP500. Since inception, our portfolio has returned 129.82% vs the MLSAX return of 31.59%.

This month demonstrated yet again the benefit of the market neutral approach in times of uncertainty and volatility. Another round of “Grexit” fears combined with a Chinese stock market sell off left investors wary for most of the month. This allowed our shorts to shine as once again the “doom and gloomers” came to the fore. We responded with a 75% hit ratio on our short side, with big double-digit gains from Peabody Energy, Clean Energy, Marin, Sears, Navistar, Rocket Fuel, and Elizabeth Arden. Bright spots for longs were limited to Heritage Insurance—with more moderate gains from Beazer Homes and Starz.

*NOTE: We have begun to use the MLSAX Long-Short Fund as a benchmark. This compares the performance of our strategy to other similar strategies. We also include the S&P500 numbers.

Valuations have edged up a bit from the low spots we saw at the height of the China/Grexit fears. We are above 60% once again thanks to the "relief" rally this week.

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Here are the primary long and short-side selections and their performance for the month.

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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

Each month you will receive an electronic copy of our newsletter highlighting 15 potential long positions along with five alternate picks. Our investment strategies focus on dozens of fundamental and technical factors for over 8000 individual stocks, synthesize the data, and then come up with a portfolio. Each newsletter portfolio focuses on maximum potential returns so there are no diversity requirements. Each portfolio pick includes critical ValuEngine valuation and forecast data. These 20 total picks represent the most up-to-date equity assessments of our proprietary models.

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  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. 

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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.

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