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The ValuEngine Weekly is an Investor Education newsletter focused on the quantitative approach to investing and the tools
available from ValuEngine. In today's fast-moving and globalized financial markets, it is easy to get overloaded with information.
The winners will adopt an objective, scientific, independent and unemotional approach to investing.
If the tables or images in this document do not display properly, please CLICK HERE to download the newsletter.
Our Chief Market Strategist Richard Suttmeier notes that it is tough to pick stocks to
buy when 43.7% are undervalued and 56.3% are overvalued. Ten of eleven sectors are
overvalued. Only Technology is undervalued, but by only 1%. 12-month and year to
date gains are great, but sustaining them gets more difficult with these overvalued
readings and extended P/E ratios.
SECTOR OVERVIEW
What's Hot
--Catching Up with TK Ng
Former ValuEngine Analyst and Quant Guru Tk Ng published the following on his
new blog Technifundamentals this week. It has been edited for presentation in our
newsletter. The complete version--along with other content of interest, can be found
HERE.
When we use VE data to construct a SOM, there are more than 20 variables
[characteristics] of each stock that are taken into account. These include fundamentals like P/
E, M/B, analyst estimates and surprise, volatility, Sharpe Ratio, 5-year return etc.
Since Health Care is in the spotlight, today we present a SOM of the sector. The
image below is a SOM of Health Care Sector stocks with market cap>$1 billion, and daily
average volume > 500,000.
When we ask the Viscovery software to map out the Health Care Sector we find that
it is less diverse than the oil industry we looked at last week--as shown by the fewer number
of clusters in the SOM (4 for Health Care Sector vs 11 for the Oil Industry.) One of the clusters
is a loner and only has one ticker in it--S4 with ISIS.
Cluster three looks the most promising in terms of Valuation (the more negative the
Valuation the more desirable), 1-month Forecast Return, and market cap (the bigger the
better in terms of risk and liquidity). We can also look at any particular datapoint and make a
SOM of that. In this manner you can also look at the Valuation and 1-month Forecast Returns
% maps and pinpoint the ticker symbols that occupy the space you like. Here is the forecast
map. "Hotter" is better. So the area around SNY is best.
Here is the valuation map. "Cooler" is better. Again, we see that cluster three and the
area around SNY shows a lot of promise.
Interested in further explorations of visual finance and anxious to see how it can be
applied to your investment needs? TK Ng is offering ValuEngine Free Weekly Newsletter
readers a free SOM of any industry covered by ValuEngine. Contact TK HERE to let him
know what industry group you are interested in and ask him to construct a SOM for you.
The ValuEngine Forecast 22 MNS Newsletter
For a market neutral strategy with significant volatility-reducing benefits, our newsletter
continues to perform remarkably well. In fact, this product has been so successful it was
recently selected by Forbes.com for inclusion into its stable of newsletter
products. Forbes.com believes that the VE Forecast 22 MNS Portfolio offers a sophisticated
newsletter for investors seeking access to hedge fund-type strategies without hefty
performance fees and onerous qualified investor requirements.
Since inception, we are up 30%, our average monthly return is @1.5%, our Sortino
Ratio--"good" volatility--beats the S&P 500 by @50%, our max drawdown is 1/3 the
S&P's, and our annual volatility is @30% less than the S&P 500!
For more on the VE Forecast 22 Market Neutral Strategy Newsletter Portfolio, Click the
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Suttmeier Says
--Commentary and Analysis from Chief Market
Strategist Richard Suttmeier
Treasuries
Gold and crude oil are well above their 120-month simple moving averages. This
is a sign of bubbles reforming.
Comex Gold shows a new quarterly support at $1052.8 with my annual pivot at
$1115.2 and semiannual and monthly resistances at $1186.5 and $1202.5, so the trading
range continues.
Nymex Crude Oil shows a new monthly pivot at $84.54, which was tested as the
second quarter begins. My annual support is $77.05 with annual resistance at $97.29.
Whenever the Fed keeps the Federal Funds Rate below 3%, commodity
speculation becomes a problem, which eventually creates bubbles, which then burst
and kill economic growth.
The euro remains well above its 120-month simple moving average after an extremely
weak first quarter. My new quarterly support is 1.2450 with monthly resistance at 1.4081.
Major Indices
The Dow has become overbought on its monthly chart with the 120-month simple
moving average as support at 10,460. My annual pivot is 10,379 with monthly, annual and
semiannual resistances at 11,228, 11,235 and 11,442. Quarterly support lags at 7,490.
The S&P 500 ended the first quarter overbought on its monthly chart and just below its
120-month simple moving average at 1178.79, which lines up with my annual pivot at 1179. I
show tight semiannual and monthly resistances at 1194.6 and 1199.6 with semiannual
resistance at 1281.1. My quarterly support lags at 805.4.
The Dow has broken out above its 120-month simple moving average, and the S&P
500 is just below its 120 month SMA. Both are now overbought on their monthly chart. 2010
is beginning to take on the look and feel of 2007.
Since the refinement of our stock picking strategy, the ValuEngine View has
outperformed the S&P every single month!
Since the market bottom in March, 2009, the ValuEngine View is beating the S&P 500
by almost 20%!
To find out more about the ValuEngine View, click the logo below