January 28, 2013

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VALUATION WATCH: Our models find that overvaluation is approaching levels typically seen when a market pullback may occur. Overvalued stocks now make up almost 62% of our universe and 24% of the universe is calculated to be overvalued by 20% or more. ALL sectors are calculated to be overvalued.

Valuation Watch is ON
ValuEngine Issues Market Valuation Watch The ValuEngine Valuation Model tracks more than 8000 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 market valuation figures and use them as a metric for making calls about the overall state of the market. As of last night's close, our overall market overvaluation and overvalued by 20% or more figures have reaches levels which have been correlated with market pull backs in the past. We now calculate that 61.67% of stocks are overvalued and 24.2% of stocks are overvalued by 20% or more. Whenever we see levels in overvaluation levels in excess of @ 60% for the overall universe and/or 27.5% for the overvalued by 20% or more categories, we issue a valuation watch. ValuEngine has issued a market valuation watch as of today, January 28th. This is a time for investors to keep a close eye on the market and to consider booking some profits and perhaps hedging against a move to the downside.

Subscribers Get FULL ACCESS to our Market and Sector Overviews The chart below tracks the valuation metrics from June 2012 until today.

This chart shows overall universe valuation in excess of 60% vs the S&P 500 from the end of March 2010 to the present. Here you can see the market metrics from our last series of Valuation Watches and Warnings.

In addition to the overall valuation metrics, we see that on a sector basis ALL sectors are calculated to be overvalued. Eight of them are calculated to be overvalued by 10% or more with four of them calculated to be more than 20% overvalued. In the past, our Chief Market Strategist Richard Suttmeier has used the sector valuation figures to buttress his macro market calls.

We are keeping a close eye on our overvaluation metrics Market Overview

Summary of VE Stock Universe
Stocks Undervalued Stocks Overvalued Stocks Undervalued by 20% Stocks Overvalued by 20% 38.33% 61.67% 14.95% 24.20%

Sector Overview
Sector
Aerospace Auto-Tires-Trucks Basic Materials Business Services Computer and Technology Construction Consumer Discretionary Consumer Staples Finance Industrial Products Medical Multi-Sector Conglomerates Oils-Energy Retail-Wholesale Transportation Utilities

Change
0.64% 0.84% -0.53% 0.02% 0.37% 0.85% 0.08% 0.03% 0.25% 0.12% 0.21% 1.09% 0.36% 0.65% 0.52% 0.14%

MTD
5.10% 6.39% 3.74% 6.18% 7.26% 8.67% 6.87% 4.17% 5.91% 5.95% 6.98% 4.47% 7.47% 7.09% 10.37% 4.28%

YTD
5.10% 6.39% 3.74% 6.18% 7.26% 8.67% 6.87% 4.17% 5.91% 5.95% 6.98% 4.47% 7.47% 7.09% 10.37% 4.28%

Valuation
7.28% overvalued 7.37% overvalued 6.41% overvalued 9.96% overvalued 15.36% overvalued 24.48% overvalued 8.52% overvalued 27.37% overvalued 15.57% overvalued 20.55% overvalued 15.58% overvalued 8.98% overvalued 6.59% overvalued 16.32% overvalued 24.13% overvalued 6.67% overvalued

Last 12MReturn
11.48% 4.37% -20.39% 8.31% 4.03% 28.22% 9.33% 12.37% 16.81% 4.00% 10.61% 15.22% -10.42% 18.68% 8.80% 8.07%

P/E Ratio
14.6 15.36 31.57 30.77 39.95 43.61 27.62 23.75 22.5 24.84 31.72 14.97 41.19 37.07 25.82 17.75