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August 26, 2015


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VALUATION WATCH: Overvalued stocks now make up 32.07% of our stocks assigned a valuation and 9.61% of those equities are calculated to be overvalued by 20% or more. Two sectors are calculated to be overvalued.


Decisions, Decisions

--Latest from FED Indicates Rate Hike will be Later Rather than Sooner

This week's trading action has unsettled markets and investors, but it may have led to at least one positive outcome for stocks. At a briefing today for regional economic conditions, New York Fed Bank Chair--and FOMC member-- William Dudley told reporters that "at this moment, the decision to begin the normalization process at the September [FOMC] meeting seems less compelling to me than it did several weeks ago. But normalization could become more compelling by the time of the meeting as we get additional information.”

That statement is definitely of the "tea-leaves needing to be read" variety, but it indicates that US markets should continue to trade under the benefit of the Fed's zero-interest rate policy (ZIRP) for a while longer. US short-term rates have hovered near 0% for most of the past seven years now. This policy provided the only real boost for the US economy as the fiscal options, controlled by politicians in Washington DC, were focused on austerity in lieu of a robust stimulus program.

It would seem quite premature to raise rates under the present circumstances, and with the Fed still responsible for a dual mandate--low inflation AND full employment--it appears cooler heads will prevail thanks to the "reality" provided by China and the global market pull back.

Dudley referenced this in his remarks by noting that “incoming data suggest the economy continues to grow at a moderate pace sufficient to cause a gradual tightening of the U.S. labor market” but “international developments have increased the downside risk to U.S. economic growth.”

Again, as we have been noting for a while now, the US economy is recovering, and we see some pressures within the labor market--as evidenced by changes in employment practices on the part of Wal-Mart, McDonald's et al. We also see a low level of inflation--bolstered by the cratering of oil and other commodities pricing.

Stocks, despite their recent gyrations, remain the only game in town where yields are concerned. We recommend investors with the means to weather this storm stay the course. We do not foresee a long-term issue for the US economy here, and we note that selling at the bottom of a down turn is often the worst move one can make. On the other hand, this is a time to tighten up those stop-losses and to stay attentive.

We now calculate that 32.07% of stocks are overvalued and 9.61% of those stocks are overvalued by 20% or more. This is a huge reversal of where we have been for much of the year. In fact, to find stocks calculated to be this "cheap," you would have to go all the way back to November, 2012.

We also use trading data to provide forecast estimates for a variety of time horizons for almost ever equity in our database. Our Buy/Sell/Hold recommendations are based upon the 1-year forecast return figure. Using valuation and forecast figures, you can rank and rate our covered stocks against each other, to find out, in an objective and systematic way, the most attractive investment targets based on your own risk/reward parameters.

For today's bulletin we used our website's advanced screening functions to search for top-rated stocks in the S&P 500. These stocks are shown below, ranked according to their short-term forecast figures. They are all considered to be "5-Engine" STRONG BUY selections.

Ticker
Company Name
Market Price
Valuation
Last 12-M Return
1-M Forecast Return
1-Yr Forecast Return
P/E Ratio
Sector Name
TSO
TESORO CORP
88.68
-8.28%
36.62%
1.54%
18.64%
8.43
Oils-Energy
VLO
VALERO ENERGY
57.61
-10.64%
6.33%
1.35%
16.31%
6.82
Oils-Energy
TRV
TRAVELERS COS
97.75
-9.53%
3.67%
1.19%
14.28%
9.27
Finance
GT
GOODYEAR TIRE
27.83
12.26%
10.66%
1.18%
14.14%
9.71
Auto-Tires-Trucks
AAL
AMER AIRLINES
37.5
-19.13%
-4.87%
1.17%
14.05%
4.77
Transportation
LUV
SOUTHWEST AIR
36.52
-22.37%
13.63%
1.15%
13.89%
12.37
Transportation
HIG
HARTFORD FIN SV
44.69
18.61%
21.84%
1.14%
13.76%
11.36
Finance
AVGO
AVAGO TECHNOLOG
108.51
-16.92%
43.21%
1.14%
13.75%
14.07
Computer and Technology
GS
GOLDMAN SACHS
178.22
-10.73%
0.20%
1.12%
13.48%
9.12
Finance
XL
XL GROUP PLC
36.64
0.57%
7.99%
1.08%
13.02%
10.83
Finance
MPC
MARATHON PETROL
43.77
-5.67%
-3.37%
1.06%
12.76%
7.47
Oils-Energy
DAL
DELTA AIR LINES
41.37
-15.51%
2.10%
1.06%
12.72%
10.73
Transportation
MNK
MALLINCKRODT PL
78.66
N/A
5.58%
1.03%
12.38%
10.72
Medical
WU
WESTERN UNION
17.81
-3.77%
1.89%
1.00%
11.98%
10.73
Business Services

Below is today's data on TSO:

Tesoro (TSO) was founded in 1968 as a company primarily engaged in petroleum exploration and production. In 1969, Tesoro began operating Alaska's first refinery near Kenai. Today, Tesoro is a FORTUNE 500 company and one of the largest independent petroleum refiners and marketers in the Western United States.

VALUENGINE RECOMMENDATION: ValuEngine continues its STRONG BUY recommendation on TESORO CORP for 2015-08-25. Based on the information we have gathered and our resulting research, we feel that TESORO CORP has the probability to OUTPERFORM average market performance for the next year. The company exhibits ATTRACTIVE Sharpe Ratio and P/E Ratio.


ValuEngine Forecast
 
Target
Price*
Expected
Return
1-Month
90.05 1.54%
3-Month
90.86 2.46%
6-Month
92.68 4.51%
1-Year
105.21 18.64%
2-Year
95.37 7.54%
3-Year
63.73 -28.13%

Valuation & Rankings
Valuation
8.28% undervalued
Valuation Rank(?)
49
1-M Forecast Return
1.54%
1-M Forecast Return Rank
100
12-M Return
36.62%
Momentum Rank(?)
93
Sharpe Ratio
1.01
Sharpe Ratio Rank(?)
94
5-Y Avg Annual Return
40.40%
5-Y Avg Annual Rtn Rank
98
Volatility
40.01%
Volatility Rank(?)
44
Expected EPS Growth
-10.96%
EPS Growth Rank(?)
17
Market Cap (billions)
11.20
Size Rank
92
Trailing P/E Ratio
8.43
Trailing P/E Rank(?)
93
Forward P/E Ratio
9.47
Forward P/E Ratio Rank
83
PEG Ratio
n/a
PEG Ratio Rank
n/a
Price/Sales
0.33
Price/Sales Rank(?)
88
Market/Book
1.81
Market/Book Rank(?)
52
Beta
2.08
Beta Rank
11
Alpha
0.28
Alpha Rank
91

 

ValuEngine.com is an independent research provider, producing buy/hold/sell recommendations, target price, and valuations on over 5,000 US and Canadian equities every trading day. 
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Read our Complete Detailed Valuation Report on Tesoro HERE.



 

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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
19.75% 14.13%
Ann Volatility
21.06% 11.13%
Sharpe Ratio
0.94 1.27
Sortino Ratio
1.55 1.56
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. 

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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
69.32%
Stocks Overvalued
30.68%
Stocks Undervalued by 20%
30.07%
Stocks Overvalued by 20%
8.9%

ValuEngine Sector Overview

Sector
Change
MTD
YTD
Valuation
Last 12-MReturn
P/E Ratio
-0.08%
-9.28%
-4.83%
4.12% overvalued
-9.37%
19.61
0.14%
-9.59%
4.35%
2.98% overvalued
5.35%
30.41
-0.15%
-8.70%
-7.31%
1.19% undervalued
-7.99%
21.41
-0.25%
-8.70%
-4.08%
1.95% undervalued
-9.44%
22.26
0.16%
-8.89%
-9.79%
4.66% undervalued
-3.93%
22.68
0.19%
-7.68%
-1.39%
5.29% undervalued
-9.31%
25.95
-0.12%
-7.21%
-5.18%
6.60% undervalued
-7.56%
16.30
-0.69%
-7.24%
-9.76%
7.20% undervalued
-12.74%
20.53
-0.20%
-8.44%
-8.34%
7.47% undervalued
-10.60%
27.34
-0.24%
-10.10%
-11.08%
7.91% undervalued
-13.17%
20.74
-1.44%
-6.99%
-4.34%
12.77% undervalued
-8.90%
21.85
-0.87%
-9.63%
-10.69%
12.91% undervalued
-17.43%
17.56
-0.26%
-10.30%
-11.65%
14.07% undervalued
-18.12%
14.21
-0.00%
-12.03%
-14.68%
14.26% undervalued
-18.92%
15.29
-0.53%
-7.66%
-18.13%
22.64% undervalued
-37.99%
19.46
0.53%
-15.13%
-25.17%
25.81% undervalued
-52.45%
20.51

 

 

 

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