June 17, 2016

VALUATION WATCH: Overvalued stocks now make up 38.86% of our stocks assigned a valuation and 13.07% of those equities are calculated to be overvalued by 20% or more. Four sectors are calculated to be overvalued.

ValuEngine Index Overview

ValuEngine Market Overview

ValuEngine Sector Overview

Sector Talk--Industrial Products

  Below, we present the latest data on Industrial Products 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 Industrial Products Stocks--Short-Term Forecast Returns

Top-Five Industrial Products Stocks--Long-Term Forecast Returns

Top-Five Industrial Products Stocks--Composite Score

Top-Five Industrial Products Stocks--Most Overvalued

Free Download for Readers

As a bonus to our Free Weekly Newsletter subscribers,
we are offering a FREE DOWNLOAD of one of our Stock Reports

Apple Inc. (AAPL) is engaged in designing, manufacturing and marketing mobile communication and media devices, personal computers, and portable digital music players. The Company's products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and Mac OS X operating systems, iCloud, and a range of accessory, service and support offerings. It sells its products worldwide through its online stores, its retail stores, its direct sales force, third-party wholesalers, and resellers. Apple Inc. is headquartered in Cupertino, California.

This week was the big Apple event, WWDC 2016. As has been the case lately, the company announced a variety of incremental updates to existing products rather than stunning their user base with some category-shattering device.

The latest iteration of the OS will be known as "Sierra" and will be released in beta form in July. The big news here is a new capability to more fully integrate with the cloud and across all Apple devices. Other developments include the porting of the popular iPhone AI assistant/"concierge" function--Siri--to the company's desktop computers, an expansion of the company's Apple Pay service to the web via the Apple Safari browser, and a new OS for the Apple watch. In addition, the company has updated its maps, news, and music services.

We often focus on Apple news because the company inspires such fanatical loyalty amongst its user base, but once again what we see here is a rather lackluster group of updates and changes that may not be enough to boost sales or attract new users to the world of Apple.

As analysts have noted for along time now, the company was so successful for so long that the big growth needed to support an ever-increasing share price was simply unsustainable. This is not to say it is a bad stock, a bad company, or that their products are not wonderful. But, the amount of explosive growth found when the company developed the iPod, the iPhone, and the iPad, was simply unsustainable because the company is just too large.

ValuEngine continues its HOLD recommendation on APPLE INC for 2016-06-16. Based on the information we have gathered and our resulting research, we feel that APPLE INC has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE Company Size but UNATTRACTIVE Earnings Growth Rate.

Read our Complete Detailed Valuation Report on Apple HERE.

Valuation & Rankings
Valuation	8.46% undervalued	Valuation Rank(?)	57
1-M Forecast Return	0.03%	1-M Forecast Return Rank	53
12-M Return	-23.55%	Momentum Rank(?)	34
Sharpe Ratio	0.53	Sharpe Ratio Rank(?)	86
5-Y Avg Annual Return	13.96%	5-Y Avg Annual Rtn Rank	88
Volatility	26.18%	Volatility Rank(?)	64
Expected EPS Growth	-1.73%	EPS Growth Rank(?)	22
Market Cap (billions)	568.20	Size Rank	100
Trailing P/E Ratio	11.23	Trailing P/E Rank(?)	86
Forward P/E Ratio	11.42	Forward P/E Ratio Rank	73
PEG Ratio	n/a	PEG Ratio Rank	n/a
Price/Sales	2.50	Price/Sales Rank(?)	37
Market/Book	4.68	Market/Book Rank(?)	25
Beta	0.98	Beta Rank	46
Alpha	-0.26	Alpha Rank	26

What's Hot

Valuations Hover Near Normal Range (Barely)

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 38.86% of the stocks we can assign a valuation are overvalued and 13.07% of those stocks are overvalued by 20% or more. These numbers have declined-- slightly-- since we published our valuation study in May-- when the overvaluation was at 44.04%.

Not much has changed since our last valuation study, except we now know for certain that the US presidential election will feature Trump vs. Clinton. But, that news creates an uncertainty for sure, as Trump continues to make headlines almost every day--seemingly every time he opens his mouth. Clinton offers a continuation of Obama-era policies (which have generated booming markets, reduced deficits, and economic recovery. It's tough to tell what Trump offers, because he has made so many contradictory statements-- and his policies are often roundly panned by analysts and economists.

Good news since our last report includes the recovery in the energy markets, with oil prices recently closing above $50/barrel--of course, we've seen some erosion in those oil prices since then, but it remains to be seen whether this is just "noise."Bad news includes a May jobs report that showed bad numbers and some questions about what many thought was a stronger, ongoing recovery.

This week's Fed meeting resulted in no changes--as expected. But, the Central Bank is not giving any certainty to investors that they will refuse to hit the brakes on growth yet again as we move forward. The last rate-hike move still seems premature, as the labor market hasn't really benefitted from recovery in wages and inflation remains nowhere to be found. The Fed struck a more cautious tone this week, noting that the US economy had slowed amid concerns about the global economy more generally.

As always, the balancing act between the dual mandate of control inflation and foster full employment creates tension. we currently have low inflation and a job market which is near "full employment" according to past standards, but it sure doesn't seem that workers are benefitting from the recovery. That weak May jobs report was the catalyst for caution, and caused Fed members to lose their inclination to raise rates once again.

In addition, there is a concern that a UK "Brexit" might cause chaos in world markets and thus a US move to slow growth would provide additional harmful effects. And, the Fed--despite protestations to the contrary-- may be reticent to make moves that couldl be seen as biased in the midst of a presidential election campaign.

Regardless, our valuation figures still show a near "normal" market.

The chart below tracks the valuation metrics from June 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 June 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.

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

If you no longer wish to receive this free newsletter, CLICK HERE to unsubscribe