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October 21, 2010

Flying High Again

Positive News from Airlines Leads to Gains for ValuEngine Forecast 22

Newsletter Picks AMR and LCC

Subscribers to our ValuEngine Forecast 22 Market Neutral Strategy Portfolio

Newsletter got a nice surprise yesterday as current long selections AMR
Corp/American Airlines (AMR) and US Airways (LCC) reported good numbers for
Q3. Shares in both carriers jumped up 7% and 13% following the news. Currently, the
tickers are up @17% and 10% since our rebalance on Friday of last week.
Our model has done pretty well with airline stocks over the past year or so,
topped off by a whopping 202% gain in UAUA as the model selected that stock back
in November 2009 just as the airlines emerged from their fuel price shocks and the
worst of the recession. Airlines have been increasingly profitable thanks to reduced
fuel costs, increased travel, the creation of additional revenue streams (such as the
hated checked baggage fees) and various adjustments to routes and scheduling
which have boosted efficiency and reduced empty seats.
Looking ahead, our Forecast model sees a muddy picture for US Airways with
short term gains followed up by negative one and two-year forecast figures. The
model gets increasingly pessimistic after three months. For AMR Corp., the longer-
term picture is far more attractive with positive forecasts across the board-- and a
whopping 41.8% giant projected for the three-year timeframe.
Subscribers can check out the latest figures on US Airways, AMR Corp, and the Airline
Industry from our models HERE
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MARKET OVERVIEW
Summary of VE Stock Universe
Stocks Undervalued 57.74%
Stocks Overvalued 42.26%
Stocks Undervalued by 20% 26.59%
Stocks Overvalued by 20% 14.55%

SECTOR OVERVIEW
Last 12- P/E
Sector Change MTD YTD Valuation
MReturn Ratio
Basic Industries 1.80% 2.30% 24.09% 5.13% overvalued 34.70% 25.36
Capital Goods 1.29% 4.00% 20.85% 3.90% undervalued 14.56% 21.63
Consumer Durables 0.43% 3.29% 16.23% 8.18% undervalued 22.90% 19.69
Consumer Non-Durables 0.64% 3.29% 10.73% 1.61% undervalued 18.95% 17.06
Consumer Services 0.84% 2.98% 13.59% 5.66% undervalued 11.69% 21.43
Energy 1.24% 3.77% 8.77% 6.04% overvalued 20.96% 25.05
Finance 0.90% 3.70% 13.89% 5.42% undervalued 7.56% 18.1
Health Care 0.77% 3.13% 22.70% 10.33% undervalued 5.44% 20.61
Public Utilities 1.10% 3.02% 2.60% 2.46% overvalued 13.20% 20.2
Technology 0.93% 4.19% 21.00% 5.90% undervalued 21.70% 24.64
Transportation 1.35% 4.15% 14.38% 0.77% undervalued 17.31% 19.19