August 26, 2016

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VALUATION WATCH: Overvalued stocks now make up 48% of our stocks

assigned a valuation and 15.58% of those equities are calculated to be
overvalued by 20% or more. Nine sectors are calculated to be overvalued.
MARKET OVERVIEW
Index

Started week

Friday AM

Change

Change %

ytd

DJIA

18535.86

18504.15

-31.71

-0.17%

5.87%

NASDAQ

5231.46

5224.04

-7.42

-0.14%

4.09%

RUSSELL 2000

1236.6

1240

3.40

0.27%

9.17%

S&P 500

2181.58

2178.91

-2.67

-0.12%

6.29%

Summary of VE Stock Universe

Stocks Undervalued

52.00%

Stocks Overvalued

48.00%

Stocks Undervalued by 20%

21.72%

Stocks Overvalued by 20%

15.58%

SECTOR OVERVIEW
Sector

Change

MTD

YTD

Valuation

Last 12-M
Return

P/E
Ratio

Aerospace

-0.24%

0.43%

-0.60%

3.09% overvalued

4.64%

19.31

Auto-Tires-Trucks

0.08%

1.59%

4.21%

8.43% undervalued

6.81%

16.38

Basic Materials

0.81%

-0.48%

46.80%

6.55% overvalued

63.57%

32.77

Business Services

0.09%

1.03%

14.88%

5.21% undervalued

4.19%

24.77

Computer and Technology

0.11%

2.78%

14.54%

2.35% overvalued

12.89%

29.5

Construction

-0.15%

0.80%

30.43%

0.76% undervalued

17.81%

21.32

Consumer Discretionary

-0.25%

1.55%

9.16%

0.94% undervalued

3.49%

24.09

Consumer Staples

0.10%

1.34%

12.88%

9.89% overvalued

16.23%

23.99

Finance

0.18%

1.97%

6.56%

0.39% overvalued

7.77%

16.2

Industrial Products

0.21%

3.09%

16.61%

7.18% overvalued

13.92%

23.16

Medical

-0.23%

-1.43%

0.05%

10.80% undervalued

-10.65%

27.27

Multi-Sector Conglomerates

-0.03%

2.34%

9.81%

13.55% overvalued

10.31%

20.87

Oils-Energy

0.34%

2.43%

16.08%

1.79% overvalued

1.06%

25.51

Retail-Wholesale

-0.65%

2.30%

2.62%

8.49% undervalued

1.12%

23.41

Transportation

-0.47%

0.34%

11.29%

5.15% undervalued

-10.28%

14.92

Utilities

0.53%

-2.29%

11.12%

3.41% overvalued

17.61%

22.2

Sector TalkConstruction
Below, we present the latest data on leading Construction Sector stocks from
our Professional Stock Analysis Service. 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 Construction Sector Stocks--Short-Term Forecast Returns

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

ACM

AECOM

32.18

-8.41%

24.34%

DY

DYCOM INDS

83.71

-15.77%

38.80%

THO

THOR INDS INC

80.3

5.65%

54.96%

GRAM

GRANA Y MONTERO

8.15

N/A

102.74%

WGO

WINNEBAGO

23.93

-5.48%

25.55%

Top-Five Construction Sector Stocks--Long-Term Forecast Returns

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

ACM

AECOM

32.18

-8.41%

24.34%

DY

DYCOM INDS

83.71

-15.77%

38.80%

THO

THOR INDS INC

80.3

5.65%

54.96%

GRAM

GRANA Y MONTERO

8.15

N/A

102.74%

WGO

WINNEBAGO

23.93

-5.48%

25.55%

Top-Five Construction Sector Stocks--Composite Score

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

ACM

AECOM

32.18

-8.41%

24.34%

DY

DYCOM INDS

83.71

-15.77%

38.80%

FLR

FLUOR CORP-NEW

52.88

-3.65%

23.87%

PHM

PULTE GROUP ONC

21.57

-7.86%

14.07%

THO

THOR INDS INC

80.3

5.65%

54.96%

Top-Five Construction Sector Stocks--Most Overvalued

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

LAYN

LAYNE CHRISTENS

8.92

72.22%

35.36%

MTZ

MASTEC INC

30.36

44.48%

106.95%

TPC

TUTOR PERINI CP

23.39

34.38%

42.45%

UFPI

UNIVL FST PRODS

108.82

33.17%

84.13%

PRIM

PRIMORIS SERVCS

19.81

26.15%

21.83%

Find out what Wall Street Investment and Media Professionals already know,
ValuEngine offers sophisticated stock valuation and forecast research as well as a
variety of portfolio screening and creation tools.

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
Mylan NV (MYL) is a pharmaceutical company. The company develops,
licenses, manufactures, markets and distributes generic and specialty
pharmaceuticals. It operates primarily in the United States, Canada, Europe, the
Middle East, Africa, India, Australia, Japan and New Zealand. Mylan NV, formerly
known as Mylan Inc., is based in Canonsburg, Pennsylvania.
VALUENGINE RECOMMENDATION: ValuEngine continues its HOLD
recommendation on MYLAN NV for 2016-08-25. Based on the information we have
gathered and our resulting research, we feel that MYLAN NV has the probability to
ROUGHLY MATCH average market performance for the next year. The company
exhibits ATTRACTIVE P/E Ratio but UNATTRACTIVE Momentum.
Read our Complete Detailed Valuation Report on Mylan HERE.

ValuEngine Forecast
Target
Price*

Expected
Return

1-Month

42.89

0.08%

3-Month

42.79

-0.15%

6-Month

42.26

-1.37%

1-Year

43.28

1.01%

2-Year

41.64

-2.81%

3-Year

29.23

-31.80%

Valuation & Rankings

Valuation

31.61% undervalued

Valuation Rank(?)

1-M Forecast Return

0.08%

1-M Forecast Return Rank

12-M Return

-12.75%

Momentum Rank(?)

87
57
27

Sharpe Ratio

0.46

Sharpe Ratio Rank(?)

5-Y Avg Annual Return

14.40%

5-Y Avg Annual Rtn Rank

Volatility

31.32%

Volatility Rank(?)

55

Expected EPS Growth

22.55%

EPS Growth Rank(?)

61

Market Cap (billions)

16.07

Size Rank

80
86

93

Trailing P/E Ratio

9.26

Trailing P/E Rank(?)

93

Forward P/E Ratio

7.56

Forward P/E Ratio Rank

92

PEG Ratio

0.41

PEG Ratio Rank

Price/Sales

1.62

Price/Sales Rank(?)

53

Market/Book

1.56

Market/Book Rank(?)

61

63

Beta

1.26

Beta Rank

31

Alpha

-0.22

Alpha Rank

26

What's Hot-Valuations Remain In "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 48% of the stocks we can assign a valuation are
overvalued and 15.58% of those stocks are overvalued by 20% or more. These
numbers have increased-- slightly-- since we published our valuation study in July-when the overvaluation was at 46%.
The markets in the US and elsewhere certainly shook off that Brexit panic, with
several indices setting new records throughout this Summer. The word now is "melt up"
with many of the more bullish analysts arguing that as investors return from their
Summer vacations and buckle down again in Fall, we may find more money coming
into the market.
The optimists, as always, are facing off against those bears, who claim that this
is all a bubble and once the Fed raises rates again the party will be over. Of course,
those bears have been pushing that line throughout this historic rally. And if you had
followed their advice at pretty much any time over the past seven years, you would
have done the wrong thing for your long-term financial health.
We remain, as we have throughout the aftermath of the Bush recession,
convinced that the Fed should refrain from further action not to provide additional
aid to the stock market, but to help US workers. Their dual mandate demands that
inflation be controlled--it is--and "full employment" be achieved.
That second part of the equation is where we have controversy. The official
rate is currently @5%. But, we do not see the sort of wage increases and pressures one
would expect if the labor market was tight. We do not think that rates should be
increased until we see workers sharing in the prosperity.
While some Fed officials may desire to boost rates again before the end of
2016, we still believe that this will be difficult. We have a presidential election, a bad
time to be seen as "political." We also have continued questions about both global
and US economic growth. A trifecta of bad news has challenged the Fed--first in
China, the the EU with Brexit, and then due to continued questions about the US
overall GDP-growth rate.
Currently, futures contracts indicate that most investors remain doubtful that
the US central bank will raise rates in September or November. And, for the last
chance in December investor think the odds are still @50-50.
For now, our valuation figures still show a "normal" market, with valuations that
remain nowhere near the bargain level they indicated in the immediate aftermath of
the Brexit vote in June.

The chart below tracks the valuation metrics so far this Summer. It encompasses the
Brexit sell off. It shows levels in excess of 40%.

The chart below tracks the valuation metrics from August 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
August 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.

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