8/7/2019 ValuEngine.com Market Valuation Watch is Off

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May 4, 2011

VALUATION WATCH: Valuation at current levels is considered to be within

"normal" range and therefore the Valuation Watch is OFF.

Valuation Summary

ValuEngine.com Market Valuation Watch is Off 

The ValuEngine Valuation Model tracks more than 5000 US equities, ADRs, and

foreign stock which trade on US exchanges. The model calculates a level of

mispricing or valuation percentage for each equity based on 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.

We track valuation figures and use them as a metric for making calls about the

overall state of the market. Whenever we see levels in overvaluation levels in excess

of @ 60% for the overall universe and 27.5% for the overvalued by 20% or morecategories, we issue a valuation watch. When overvaluation exceeds 65%, we issue a

valuation warning.

Our last Valuation Watch took place from March 30th to April 13th. We began

that Valuation Watch with the SP 500 at 1319 and saw it rise to 1335 before dropping

to 1314. At that time we saw our overall valuation figures approach the Valuation

Warning level of 65%-- but they peaked at 64.27%. Since that mid-April dip, the

market resumed its upward climb.

We began our latest Valuation Watch on April 28th with the SP 500 at 1355 and

the overvaluation figures almost hitting 62%. As of today, the market is at 1356.62 and

the overvaluation figure is at 57.48% while the overvaluation by 20% or more figure

has receded to 23.67%. Therefore, we have removed our Valuation Watch.

Why the decline in valuations if the market is at roughly the same level?

1. the models re-evaluate the entire universe after every trading day. As new earnings and EPS

estimates are developed, our valuation readings can change. Better earnings at a given

market price level tend to reduce overvaluation valuation levels.

8/7/2019 ValuEngine.com Market Valuation Watch is Off

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2. At the end of every month we complete a major database update which effects overall

model parameters and calculations.

Our watches and warnings let us know that the model thinks things are

overheated, but they cannot tell us when a correction will occur, nor can they tell usits duration and depth. In some cases the market heads for a long dive, in others we

see juts a momentary drop before the market resumes an upward climb. We simply

do not possess the long-term historical data necessary to complete a better study of

the metric. We will continue to watch and track the overvaluation metric so that we

may add to our dataset.

MARKET OVERVIEWSummary of VE Stock Universe

Stocks Undervalued 42.52%

Stocks Overvalued 57.48%

Stocks Undervalued by 20% 16.43%

Stocks Overvalued by 20% 23.67%

SECTOR OVERVIEWSector Change MTD YTD Valuation Last 12-

MReturnP/E

Ratio

Aerospace -0.92% -0.87% 12.60% 6.18% overvalued 17.57% 19.08

Auto-Tires-Trucks -0.88% -0.82% -1.65% 4.70% overvalued 36.66% 20.25

Basic Materials -2.15% -2.06% -1.96% 2.58% overvalued 38.42% 25.23

Business Services -0.76% -0.56% 6.57% 8.15% overvalued 8.98% 38.66

Computer and Technology -1.68% -1.55% 11.35% 5.97% overvalued 23.16% 45.33

Construction -1.22% -1.17% -0.41% 2.01% overvalued -3.68% 50.01

Consumer Discretionary -0.67% -0.61% 7.01% 4.50% overvalued 6.63% 29.7

Consumer Staples -0.96% -0.88% -1.95% 7.23% overvalued 12.54% 21.24

Finance -0.55% -0.50% 3.22% 4.64% overvalued 2.88% 25.38

Industrial Products -1.10% -1.02% 6.95% 6.97% overvalued 18.59% 32.38

Medical -0.95% -0.85% 14.73% 3.37% overvalued 10.33% 35.06

Multi-Sector Conglomerates -0.91% -0.87% 5.72% 11.94% overvalued 23.42% 28.47

Oils-Energy -2.35% -2.19% 7.71% 12.88% overvalued 30.74% 48.92

Retail-Wholesale -0.88% -0.84% 6.49% 4.48% overvalued 12.87% 34.72

Transportation -1.20% -1.14% 0.04% 6.98% overvalued 11.10% 20.5

Utilities -0.44% -0.42% 6.73% 10.65% overvalued 17.25% 23.93