April 15, 2016

VALUATION WATCH: Overvalued stocks now make up 43.08% of our stocks assigned a valuation and 12.99% of those equities are calculated to be overvalued by 20% or more. Six sectors are calculated to be overvalued.

ValuEngine Index Overview

ValuEngine Market Overview

ValuEngine Sector Overview

Sector Talk--Aerospace

  Below, we present the latest data on Aerospace stocks from our Professional Stock Analysis Service    Top five lists are provided for each category.  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 Aerospace Stocks--Short-Term Forecast Returns

Top-Five Aerospace Stocks--Long-Term Forecast Returns

Top-Five Aerospace Stocks--Composite Score

Top-Five Aerospace Stocks--Most Overvalued

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Microsoft (MSFT) is a technology company. Their products include operating systems for computing devices, servers, phones, and other intelligent devices; server applications for distributed computing environments; cross-device productivity applications; business solution applications; desktop and server management tools; software development tools; video games; and online advertising. They also design and sell hardware including PCs, tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories. They offer cloud-based solutions that provide customers with software, services, platforms, and content. They also provide consulting and product and solution support services, and they train and certify computer system integrators and developers.

ValuEngine continues its BUY recommendation on MICROSOFT CORP for 2016-04-14. Based on the information we have gathered and our resulting research, we feel that MICROSOFT CORP has the probability to OUTPERFORM average market performance for the next year. The company exhibits ATTRACTIVE Company Size and Momentum.

Read our Complete Detailed Valuation Report on Microsoft HERE.

ValuEngine Forecast
	Target Price*	Expected Return
1-Month	55.76	0.73%
3-Month	57.21	3.34%
6-Month	59.15	6.85%
1-Year	60.18	8.70%
2-Year	70.25	26.90%
3-Year	73.25	32.32%

Valuation & Rankings
Valuation	39.12% overvalued	Valuation Rank(?)	7
1-M Forecast Return	0.73%	1-M Forecast Return Rank	92
12-M Return	32.92%	Momentum Rank(?)	93
Sharpe Ratio	0.72	Sharpe Ratio Rank(?)	93
5-Y Avg Annual Return	15.54%	5-Y Avg Annual Rtn Rank	90
Volatility	21.60%	Volatility Rank(?)	72
Expected EPS Growth	6.30%	EPS Growth Rank(?)	34
Market Cap (billions)	454.16	Size Rank	100
Trailing P/E Ratio	20.50	Trailing P/E Rank(?)	57
Forward P/E Ratio	19.29	Forward P/E Ratio Rank	32
PEG Ratio	3.26	PEG Ratio Rank	12
Price/Sales	5.16	Price/Sales Rank(?)	17
Market/Book	8.30	Market/Book Rank(?)	14
Beta	0.96	Beta Rank	47
Alpha	0.31	Alpha Rank	93

What's Hot

Valuations Back Into Normal Range

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 43.08% of the stocks we can assign a valuation are overvalued and 12.99% of those stocks are overvalued by 20% or more. These numbers are just a bit higher than what we saw the last time we published our valuation study at the beginning of March. We saw values climbing well into "normal" range--between 40-60%--during the market rally since then, but they declined a bit with the latest pull back, and then jumped up once more with the rally over the past few days.

In case you hadn't noticed, the US is in a presidential election cycle, which has often correlated to a good year for stocks in the past. However, this year we see a variety of challenges. Every bit of good news about the US economy gets negated by something in China, or on the world-wide commodities markets, or in the energy sector, etc.

We need to wait and see what happens this cycle. We remain confident that if the Fed manages to curb its appetite for rate increases in order to allow US workers to benefit from the recovery--finally--we will see decent growth here. Of course, this pre-supposes election results which do not end up in new austerity measures, government shut downs, etc.

The chart below tracks the valuation metrics from April 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 April 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.

ValuEngine In The News

Editor's Note: The Following Article Was Posted By Integrity Research This Week

ValuEngine Offers Money Management On Top Of Research

Recently, Melbourne Florida-based quantitative research firm ValuEngine, formed a separate registered investment advisory firm called ValuEngine Capital Management to provide investment management services to retail clients based on ValuEngine’s time tested independent research.

ValuEngine Capital Management (VECM) initially rolled out three (3) different portfolios based on unique strategies developed by ValuEngine reflecting the risk-reward profiles of different investors.  These strategies include the ValuEngine View Strategy, the ValuEngine Market Neutral Strategy, and the ValuEngine Diversified Strategy.

VECM is targeting retail customers with a minimum $20,000 to invest, and fees for VCMs management services run 1.5% of assets invested.  In addition to receiving professional investment management services, VCM clients all receive a complimentary subscription to VE’s proprietary research services.

ValuEngine (VE) is a stock valuation and forecasting service founded by Ivy League finance academics and Wall Street professionals in 1996 which forecasts more than 5,000 stocks, REITS, ADRs, and foreign stocks actively traded on US exchanges.  The service has traditionally been available to retail and professional investors who subscribe to it from the ValuEngine website (www.valuengine.com).

For the past 15 years, ValuEngine has toyed with the idea of providing clients the ability to directly invest based on their research.  Unfortunately, life as a small business always got in the way.  However, after the market crash of 2008, retail investors became less interested in conducting their own investment research, settling on the free information available from Yahoo Finance or Google.  Consequently, as individual subscriptions plummeted, ValuEngine looked for other ways to grow its business of serving retail investors.

This led the firm to start aggressively licensing its research to large banks and brokerage firms who then redistribute it to their retail clients.  A few of these partners include Wells Fargo, Scotia Capital, Forbes.com and Fidelity.

While investors were not interested in paying for third-party research services, they did indicate that they were more open to a “full-service” offering bundling both ValuEngine’s independent research services with money management.  Hence ValuEngine Capital Management was born.

While it is still too early to tell whether VCM will be a success, in its early days management says that they are finding it much easier and more lucrative to set up new money management accounts than it is to sell research.

Of course, providing money management is substantially more expensive an undertaking than just providing research given the regulatory, compliance, and customer support overhead required.  In addition, the money management space is an extremely crowded one with thousands of traditional active managers, and the plethora of much cheaper passively managed investment products.

However, VCM does not need to attract billions of dollars in assets under management to make it a success for ValuEngine.  Rather, VCM just provides another way for ValuEngine to commercialize its valuable research IP. The interesting question for us is whether other independent research firms will try to diversify their revenues by getting into the money management business.  We will wait and see.

BY MICHAEL MAYHEW

APRIL 11, 2016

ValuEngineCapital Money Management Services

We are pleased to announce that ValuEngine Capital has begun trading for our clients. ValuEngine Capital, a registered investment advisory firm, offers our clients investment-management services based on industry-leading ValuEngine research. ValuEngine Capital melds the cutting-edge financial theory of ValuEngine's award-winning quantitative independent research with the best real-world Wall St. practices. ValuEngine Capital offers refined investment portfolios for investors of all risk-reward profiles.

ValuEngine Capital is offering three investment strategies to clients, the ValuEngine View Strategy, the ValuEngine Market Neutral Strategy, and the ValuEngine Diversified Strategy.

ValuEngine View Strategy: The ValuEngine View Strategy 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. The ValuEngine View portfolio is constructed by integrating both our Aggressive Growth—based on the Valuation Model--and Diversified Growth—based on the Forecast Model-- Portfolio Strategies. The ValuEngine View Strategy is constructed by integrating this model along with some basic rules for market capitalization and industry diversification. The portfolio has 15 stocks and is rebalanced once each month.

ValuEngine Market Neutral Strategy: The ValuEngine Market Neutral Strategy is the product of ValuEngine's Forecast Model. This model was developed by a team of PhD's and is based on the cutting edge economic theories of Wall Street professionals and Ivy League academics. We carefully examine dozens of fundamental and technical factors for over 8,000 individual stocks, synthesize the data, and then come up with a sector-diverse list of our best and worst forecast 1-month return stocks. Short and long-term historic factors in the VE Forecast model's calculation include past-valuation levels of the stock and its recent price-momentum factor relative to other stocks. The ValuEngine Market Neutral Strategy utilizes Forecast Model outputs along with market capitalization, price, and sector diversification rules to construct a monthly portfolio made up of 16 stocks for both the long and short sides.

Strategies To Suit All Investor Types

The ValuEngine Diversified Strategy: The ValuEngine Diversified Strategy invests in a variety of asset classes in order to provide investors with stable returns and a high- dividend yield coupled with significantly lower risk than single-asset products. The ValuEngine Diversified Strategy may include ETFs focused on commodities, stock indices, REITS, bonds, emerging markets, and other suitable products. By reaping the benefits of diversification, the ValuEngine Diversified Strategy seeks to remain resilient during times of market volatility. The ValuEngine Diversified Strategy is designed for investors seeking management for their IRA and other retirement funds as well as those whose risk-profile is not suitable for our other strategies.

For more information, please contact us by email at info@ValuEngineCapital.com or by phone at (407) 308-5686.

ValuEngine.com is an independent research provider, producing buy/hold/sell recommendations, target price, and valuations on over 7,000 US and Canadian equities every trading day.

 Visit www.ValuEngine.com for more information

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