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December 18, 2009


MARKET OVERVIEW

Thursday 4 day 4 day


Index started week ytd
close change change %
DJIA 10471.28 10308.26 -163.02 -1.56% 17.51%
NASDAQ 2202.31 2180.05 -22.26 -1.01% 38.08%
RUSSELL 2000 602.57 604.25 1.68 0.28% 20.97%
S&P 500 1107.84 1096.08 -11.76 -1.07% 21.38%

Summary of VE Stock Universe


Stocks Undervalued 55.84%
Stocks Overvalued 44.16%
Stocks Undervalued by 20% 28.56%
Stocks Overvalued by 20% 21.47%

SECTOR OVERVIEW

Sector Change MTD YTD Valuation Last 12- P/E Ratio


MReturn
Basic Industries -1.63% 1.42% 82.13% 12.34% overvalued 73.75% 26.7
Capital Goods -0.81% 0.56% 33.41% 6.47% overvalued 37.64% 23.92
Consumer Durables -1.04% 1.52% 75.99% 8.70% overvalued 57.33% 25.02
Consumer Non-Durables -1.02% 0.74% 50.06% 3.27% overvalued 57.64% 20.39
Consumer Services -1.12% 1.24% 55.92% 0.23% undervalued 59.41% 22.21
Energy -1.00% 2.99% 52.80% 8.47% overvalued 49.51% 19.32
Finance -0.61% -0.04% 21.59% 2.02% undervalued 25.60% 19.21
Health Care -1.51% -0.25% 52.98% 11.65% undervalued 50.89% 19.91
Public Utilities -1.04% 1.34% 21.26% 1.39% undervalued 34.57% 16.97
Technology -0.59% 2.00% 69.81% 8.00% undervalued 67.90% 26.17
Transportation -1.50% 1.56% 25.47% 3.92% overvalued 32.94% 19.89
Sector Talk
--Transportation

For this week's Sector Talk, we provide a variety of lists of our top and bottom-ranked
stocks from the Transportation Sector. We screened our results with some basic liquidity
criteria--volume above 100,000 shares/day, market price greater than $1.00/share. Airlines
dominate the Forecast-Return lists while the Composite calculations show a more equitable
distribution of industry components. The weakest companies in terms of composite score are
Maritimes and Trucking firms.
First up we have our industry component breakdown list. As you can see, Airlines and
Trucking are the best recent performers on a MTD basis--indeed, airline UAUA provided our
Forecast 22 MNS newsletter Portfolio with a 47% gain last month!

Last 12-M P/E


Industry Change MTD YTD Valuation
Return Ratio
TRUCKING 1.18% 4.69% 11.41% 25.06% overvalued 23.30% 36.48
MARITIME -1.25% -2.97% 13.56% 7.01% overvalued 19.70% 14.22
RAILROADS -1.95% 0.83% 44.74% 5.58% overvalued 26.71% 20.33
MULTI-IND TRANSN -3.46% -1.69% 13.54% 3.62% undervalued 18.11% 25.04
AIRLINES -2.01% 6.95% 44.07% 9.39% undervalued 56.96% 16.32

Top-Ten Transportation Sector Stocks--Short-Term Forecast Returns


Last 12- Forecast Forecast
Mkt Valuation VE Comp 5-Yr P/E
Ticker Name M 1-Month 1-Yr Industry
Price (%) Rating Rank Retn(%) Ratio
Retn(%) Retn(%) Retn(%)
LCC US AIRWAYS GROUP INC 4.62 -40.2 3 -37.31 546 -5.85 3.1 20 N/A AIRLINES
XJT EXPRESSJET HOLDINGS INC 4.29 -75 3 149.42 626 -84.66 2.57 -0.4 N/A AIRLINES
UAUA UAL CORPORATION 11.15 39.97 3 5.19 448 47.64 1.34 4.71 N/A AIRLINES
AMR AMR CORPORATION 7.62 -21.68 3 -24.48 560 -5.46 1.22 10.72 N/A AIRLINES
EXCEL MARITIME CARRIERS
EXM 6.38 -32.14 3 -25.47 618 -19.66 0.75 0.86 18.19 MARITIME
LTD
RYAAY RYANAIR HOLDINGS PLC 25.49 -6.65 3 -15.6 636 3.42 0.57 2.61 18.52 AIRLINES
OVERSEAS SHIPHOLDING
OSG 43.8 58.93 3 12.54 480 -6.5 0.29 0.65 N/A MARITIME
GROUP
ARIES MARITIME TRANSPORT
RAMS 1.01 N/A N/A 80.36 N/A -59.94 0.1 -24.88 N/A MARITIME
LTD
MULTI-IND
UPS UNITED PARCEL SERVICE-CL B 58.23 -3.25 3 15.01 654 -7.86 0.02 2.23 25.82
TRANSN
MULTI-IND
UTIW UTI WORLDWIDE INC 14.12 -28.94 3 6.09 620 -9.49 0.01 -4.93 25.53
TRANSN
Top-Ten Transportation Sector Stocks--Long-Term Forecast Returns
Last 12- Forecast Forecast
Mkt Valuation VE Comp 5-Yr P/E
Ticker Name M 1-Month 1-Yr Industry
Price (%) Rating Rank Retn(%) Ratio
Retn(%) Retn(%) Retn(%)
LCC US AIRWAYS GROUP INC 4.62 -40.2 3 -37.31 546 -5.85 3.1 20 N/A AIRLINES
AMR AMR CORPORATION 7.62 -21.68 3 -24.48 560 -5.46 1.22 10.72 N/A AIRLINES
FRO FRONTLINE LTD 29.22 -11.36 3 -0.38 658 -12.04 -0.51 4.89 17.67 MARITIME
UAUA UAL CORPORATION 11.15 39.97 3 5.19 448 47.64 1.34 4.71 N/A AIRLINES
NORDIC AMERICAN TANKERS
NAT 30.9 24.61 3 -5.71 462 -4.06 -0.22 2.96 63.49 MARITIME
SHIPPING
RYAAY RYANAIR HOLDINGS PLC 25.49 -6.65 3 -15.6 636 3.42 0.57 2.61 18.52 AIRLINES
MULTI-IND
UPS UNITED PARCEL SERVICE-CL B 58.23 -3.25 3 15.01 654 -7.86 0.02 2.23 25.82
TRANSN
CH ROBINSON WORLDWIDE MULTI-IND
CHRW 57.79 3.67 3 13.85 620 15.02 -0.44 2 26.83
INC TRANSN
EXCEL MARITIME CARRIERS
EXM 6.38 -32.14 3 -25.47 618 -19.66 0.75 0.86 18.19 MARITIME
LTD
JAPAN AIRLINES
JALSY 5.7 -10.89 N/A N/A N/A -22.08 -0.64 0.82 N/A AIRLINES
CORPORATION

Top-Ten Transportation Sector Stocks--Composite Score Rankings*

Last 12- Forecast Forecast


Mkt Valuation VE Comp 5-Yr P/E
Ticker Name M 1-Month 1-Yr Industry
Price (%) Rating Rank Retn(%) Ratio
Retn(%) Retn(%) Retn(%)
CP CANADIAN PACIFIC RAILWAYS 53.11 -18 4 54.61 710 9.88 -1.01 -4.73 22.14 RAILROAD
AER AERCAP HOLDINGS NV 8.87 -27.74 4 250.59 682 -37.42 -4.04 -51.5 5.16 AIRLINES
FRO FRONTLINE LTD 29.22 -11.36 3 -0.38 658 -12.04 -0.51 4.89 17.67 MARITIME
TAM TAM SA 20.55 -12.22 3 148.49 658 -6.62 -2.22 -22.69 11.72 AIRLINES
MULTI-IND
UPS UNITED PARCEL SERVICE-CL B 58.23 -3.25 3 15.01 654 -7.86 0.02 2.23 25.82
TRANSN
AYR AIRCASTLE LTD 9.06 -24.98 3 96.53 652 -37.78 -2.16 -35.67 6.92 AIRLINES
GRUPO AEROPORTUARIO DEL
PAC 32.05 -17.19 3 58.35 648 -2.02 -1.43 -9.66 21.07 AIRLINES
PACIFICO
GOL LINHAS AEREAS
GOL 14.61 -25.52 3 229.8 646 -0.03 -2.22 -24.98 20.95 AIRLINES
INTELIGENTES S
MULTI-IND
FDX FEDEX CORP 84.47 -3.9 3 33.11 644 -3.12 -0.16 -3.33 32.59
TRANSN
CNI CANADIAN NATIONAL RAILWAY 52.86 1.93 3 42.75 642 11.24 -0.86 -6.78 18.19 RAILROAD
Bottom-Ten Transportation Sector Stocks--Composite Score Rankings
Last 12- Forecast Forecast
Mkt Valuation VE Comp 5-Yr P/E
Ticker Name M 1-Month 1-Yr Industry
Price (%) Rating Rank Retn(%) Ratio
Retn(%) Retn(%) Retn(%)
FREE FREESEAS INC 1.43 112.23 1 -25.13 290 -74.35 -3.15 -63.55 3.09 MARITIME
SBLK STAR BULK CARRIERS CORP 2.77 300 2 -8.28 320 N/A -2.04 -58.12 9.09 MARITIME
SAIA SAIA INC 14.97 58.84 2 60.62 334 -6.74 -1.7 -29.87 N/A TRUCKING
CGI CELADON GROUP INC 9.73 44.4 2 50.39 344 -0.1 -1.24 -26.37 N/A TRUCKING
PRGN PARAGON SHIPPING INC 4.8 124.28 2 -5.88 354 -53.34 -4.33 -67.54 2.85 MARITIME
GLNG GOLAR LNG 11.45 66.37 2 65.22 376 -5.07 -2.5 -32.55 N/A MARITIME
ABFS ARKANSAS BEST CORP 30.84 34.48 2 17.04 396 -7.15 -1.04 -10.1 N/A TRUCKING
RAILROAD
RAIL FREIGHTCAR AMERICA INC 19.83 2.61 2 1.64 396 2.05 -1.95 -27.15 16.97
S
FWRD FORWARD AIR CORP 24.44 30.75 2 10.89 420 -4.49 -0.57 -10.26 50.08 TRUCKING
DRYS DRYSHIPS INC 6.06 17.01 2 -51.25 424 -25.35 -0.08 -29.71 5.66 MARITIME
* Remember that rankings are determined by momentum (LTM), valuation, market cap, forecast, and P/E
Ratio so high figures overall may be enough to overcome weak performance in other categories--for
example, with good LTM, valuation, and size, a given equity may be predicted to out perform the overall
market despite a negative short or long-term forecast.

What's Hot
--The ValuEngine Forecast 22 Market Neutral Strategy Newsletter Portfolio

Our Forecast 22 Market Neutral Strategy Newsletter portfolio posted a gain of 1.67%
and beat the S&P benchmark by 179 bps. Our long picks beat the S&P by 558 bps! Had the
portfolio been allocated with a long bias, we would be handily beating the S&P 500
benchmark. However, the MNS approach still serves to reduce volatility-- and we reaped
significant gains from our shorts back in the dark days of January-March.

14 of our 22 long selections made money and 5 of them provided double-digit returns.
Our biggest winners were REV, STLD, NSANY, WCRX, and CPL. Our largest gain—@47%!--
came via UAL Corporation (UAUA). The huge score with UAL made the Transportation Sector
our leader, followed by Basic Industries, Consumer Durables, Health Care, and Technology.
Losing sectors for our long side this month were Capital Goods and Consumer Services.
Entry Price Current
Ticker Company Name Change %Change Sector
11-17-09 Price
CLIFFS NATURAL RESOURCES
CLF 43.28 45.28 2 4.62 BASIC INDUSTRIES
INC
STEEL DYNAMICS
STLD 15.61 17.98 2.37 15.18 BASIC INDUSTRIES
INCORPORATED
DW DREW INDUSTRIES INC 20.74 20.22 -0.52 -2.51 CAPITAL GOODS

CAT CATERPILLAR INCORPORATED 60.40 58.20 -2.2 -3.64 CAPITAL GOODS

CONSUMER
NSANY NISSAN MOTOR CO 14.78 16.31 1.53 10.35 DURABLES

CONSUMER
F FORD MOTOR CO 8.71 9.39 0.68 7.81 DURABLES

CONSUMER
CROX CROCS INC 5.92 5.63 -0.29 -4.90 NON_DURABLES

CONSUMER
REV REVLON 16.90 19.28 2.38 14.08 NON_DURABLES

AMERICAN CAMPUS CONSUMER


ACC 27.88 27.49 -0.39 -1.40 SERVICES
COMMUNITIES INC
CONSUMER
HAR HARMAN INTL INDS INC 37.09 35.95 -1.14 -3.07 SERVICES

ERF ENERPLUS RESOURCES FUND 22.99 22.40 -0.59 -2.57 ENERGY

RES RPC INCORPORATED 10.16 10.45 0.29 2.85 ENERGY

EWBC EAST WEST BANCORP, INC. 14.09 15.08 0.99 7.03 FINANCE

TAUBMAN CENTERS
TCO 34.12 35.27 1.15 3.37 FINANCE
INCORPORATED
VPHM VIROPHARMA INC 7.69 7.71 0.02 0.26 HEALTH CARE

WCRX WARNER CHILCOTT PLC 23.97 27.73 3.76 15.69 HEALTH CARE

CPL CPFL ENERGIA 58.22 63.23 5.01 8.61 PUBLIC UTILITIES

CIA DE SANEAMENTO BASICO DO


SBS 41.18 38.89 -2.29 -5.56 PUBLIC UTILITIES
ESTA
LRCX LAM RESEARCH CORP 36.27 38.90 2.63 7.25 TECHNOLOGY

AUO AU OPTRONICS CORPORATION 10.27 10.92 0.65 6.33 TECHNOLOGY

EXM EXCEL MARITIME CARRIERS LTD 7.08 6.60 -0.48 -6.78 TRANSPORT

UAUA UAL CORPORATION 7.51 11.05 3.54 47.14 TRANSPORT

LONG PORTFOLIO 5.46


GSPC S&P500 1109.3 1112.31 3.01 0.27

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.
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!

Since inception, our portfolio is up 19.08% versus the S&P's 22.95% gain for the same
time frame.

For more on the VE Forecast 22 Market Neutral Strategy Newsletter Portfolio, Click
the Logo Below

Suttmeier Says
--Commentary and Analysis from Chief Market Strategist Richard Suttmeier
If you have any comments or questions, send them to Rsuttmeier@Gmail.com

Commodities and Forex


Gold is oversold and below the 50-day simple moving average at
$1111.6 this morning. A close today below $1109 shifts the weekly chart
to negative. My quarterly pivot remains at $1135.

Crude oil is positive with the 21-day at $74.44. The weekly chart
remains negative with lower highs for nine consecutive weeks now. The
200-week simple moving average is resistance at $75.74.

The Dollar Index is overbought with the 50-day simple moving average at 75.77 with
my quarterly resistance now in sight at $78.64.

The euro is extremely oversold with the 200-day simple moving average as support at
1.4179. The weekly chart remains negative confirming the Thanksgiving bottom for the dollar.
Major Indices

The Weekly Chart for the Dow shows the failed test of the down trend that goes back
to October 2007. Next week Ascending Wedge support is 10,211 with the down trend
resistance at 10,475.

Housing

If you have a Fannie Mae or Freddie Mac backed home mortgage and face foreclosure
or eviction, you can stay home for the holidays at least through January 3rd. If you have a
Citigroup mortgage and are in default, you will get a 30-day suspension from foreclosure and
eviction. This affects around 4,000 struggling homeowners.

A year ago-- while Obama’s $75 billion loan modification program was on the drawing
board, most major lenders suspended foreclosures while the details were being hammered
out. Since this program only helped about 4% of the estimated four- to -seven million
homeowners who qualified, foreclosures picked up again at the end of the grace period.

The unwinding of Conservatorship of Fannie and Freddie must begin in 2010 - Many
say that GSE mortgages and debt are backed by the full faith and credit of United States, but
this is not an explicit guarantee. Here’s the statement still shown on the Fannie Mae website:
Fannie Mae debt securities, together with interest thereon, are not guaranteed by the
United States and do not constitute a debt or obligation of the United States or of any
agency or instrumentality thereof other than Fannie Mae. The unwinding the
Conservatorship of Fannie Mae and Freddie Mac will be come a huge issue in the second
half of 2010, as portfolios must be reduced by 10% by the end of the year.

More Problems for Commercial Real Estate - Sources say commercial real estate
mortgage defaults have more than doubled in the third quarter year over year, and are
projected to reach 19% by the first quarter of 2011. JP Morgan reported that property sales
financed with commercial mortgage-backed securities plunged 95% from a record $237 billion
in 2007, as the real estate bubble was beginning to pop. This lack of securitization is a factor
in the decline in commercial real estate values, which are down 55% from their peak. This is a
sharper decline than home values. In some major cities such as San Francisco, office rents
are down 37% year over year in the third quarter. The vacancy rate is up 14% with 1.4 million
square feet emptied in the first nine months of the year.
--The ValuEngine Quarterly FDIC Report

Our Chief Market Strategist Richard Suttmeier is an expert on the banking system, and
he has been closely following the banking and credit crisis for several years now. In fact, he
predicted the current difficulties YEARS before they began. Every quarter, he takes the
FDIC's own Quarterly Banking profile, combines it with VE's powerful quant tools, adds
additional proprietary data from the FDIC on loan exposures, and collates the info into an
exhaustive report on the state of the US banking system.

Suttmeier now predicts that several hundred more US banks will fail in the next few
years due to a variety of factors--in fact, many banks highlighted in past FDIC reports have
already failed. In addition to the valuable VE and FDIC data, the report also contains critical
ValuEngine data points on the home building industry, technical levels for a variety of banking
and housing indices, policy prescriptions, and other analysis.

The FDIC's List of Problem Banks increased to 552 at the end of the third quarter from
416 in the second quarter--which implies that the FDIC added 186 banks to the Problem List
in the quarter-- if you assume that the 50 seized banks were on the list.

Unfortunately, the FDIC still refuses to name these institutions. We have no such
restriction and we use our Quarterly FDIC Report to identify problem banks. Our Chief Market
Strategist's Quarterly FDIC Report utilizes proprietary FDIC data combined with our own
quantitative valuation, forecast, and ratings data to come up with a list of banks that violate
FDIC loan exposure guidelines and rate poorly when compared to the rest of our universe of
@4,000 equities under coverage.

There are currently 757 publicly-traded FDIC insured financial institutions overexposed
to CD Loans or Nonfarm Non-Residential Real Estate loans as per the FDIC's own guidelines.

As of December 1, 2009, there were 214 banks overexposed to C&D and/or CRE
loans in the ValuEngine database with full data coverage. Of these overexposed banks, 84
were rated “1-Engine” Strong Sells, 66 were rated “2-Engine” Sells—all of which are predicted
to under perform the markets as a whole, 60 were rated “3-Engine” Holds—which are
predicted to roughly match the overall market, three were rated a “4-Engine” Buy, and one
was rated a “5-Engine” Strong Buy—with the 4 and 5-Engine stocks predicted to out perform
the overall market.
This means that there are currently 150 banks rated Sell or Strong Sell that are
also overexposed to C&D and/or CRE loans.

There are 205 overexposed institutions with only partial ValuEngine coverage
and thus those banks have no rating--these are included in the problem bank list.

There are 340 additional institutions carrying C&D and/or CRE loans in excess of
the FDIC guidelines that do not appear in the ValuEngine database. These are also
listed in the report following the VE List of Problem Banks.

This quarter's report is now available for purchase. It provides subscribers with
critical VE data points and FDIC loan exposure data for more than 700 tickers. It also
contains the ValuEngine List of Problem Banks.

For more on the ValuEngine Quarterly FDIC Report, Click the Image Below