02/19/2021 ValuEngine Market Update, stock pick

ValuEngine is asked many times every day what our outlook for the market is for the next few months.  We always answer with uncertainty, as that is the nature of the markets these days. We are “generally positive” about the markets and recovery once we put Covid in the rear view mirror. But we are cautious that small things can upset this track. Stay invested. Diversify between riskier investments that could really benefit as the economy recovers, and safer investments to reduce losses if the train comes off the tracks.

Financial Advisory Services based on ValuEngine research available through:  www.ValuEngineCapital.com

2020 performance now available for 5 portfolios.

The ValuEngine model outputs on the overall markets:

 Summary of VE Stock Universe
Stocks Undervalued 35.13%
Stocks Overvalued 64.87%
Stocks Undervalued by 20% 13.75%
Stocks Overvalued by 20% 38.52%

While the above is not great news, it is not a terrible outlook either. Markets can often maintain long period of overvaluation as bull markets mature.  The markets have come back so fast that very strong momentum numbers are beginning to count against valuations in our models. Our numbers do indicate caution is in order, but it is not until this percentage of stocks that are over valued passes 70% that we begin to get nervous and take action. For ValuEngine Capital, even then it is a little at a time, sliding some funds from aggressive over to conservative portfolios. This sums up our “uncertain but positive” outlook.

Current ValuEngine overall Sector valuations as of the close on Friday, 02/19/2021:

Sector Change MTD YTD Valuation Last 12-M
P/E Ratio
Computer and Technology -1.27% 10.12% 21.79% 50.26% overvalued 64.02% 39.67
Auto-Tires-Trucks -2.78% 7.52% 18.55% 42.83% overvalued 58.00% 35.02
Medical -2.36% 8.62% 22.24% 40.26% overvalued 52.10% 35.74
Retail-Wholesale -0.88% 6.57% 17.50% 30.37% overvalued 44.46% 33.76
Industrial Products -1.88% 8.09% 18.05% 29.53% overvalued 46.27% 29.79
Consumer Discretionary -1.22% 8.71% 16.54% 24.61% overvalued 39.07% 28.81
Multi-Sector Conglomerates -0.98% 8.50% 15.69% 23.28% overvalued 26.22% 18.85
Construction -0.83% 7.81% 13.70% 21.96% overvalued 28.45% 24.42
Business Services -1.20% 10.01% 18.51% 20.37% overvalued 39.31% 31.72
Transportation -1.16% 13.81% 17.56% 17.85% overvalued 21.54% 22.02
Aerospace -1.51% 9.97% 10.86% 17.22% overvalued -3.44% 32.37
Basic Materials -1.66% 7.63% 11.11% 16.51% overvalued 59.07% 25.68
Consumer Staples -1.01% 6.06% 10.12% 12.13% overvalued 34.12% 29.42
Finance -0.78% 7.64% 9.58% 8.32% overvalued 4.58% 17.25
Oils-Energy -2.55% 13.81% 27.31% 5.26% overvalued 18.14% 24.33
Utilities -0.66% 1.64% 3.12% 4.77% overvalued -2.44% 23.41

All sectors are, on average, overvalued according to ValuEngine models. However, there are good stocks within each sector. The transportation sector has been a good one for ValuEngine Capital portfolios, in particular airline stocks. Also performing well were some holdings from the consumer discretionary sector such as some hotel chains, a Vegas casino or two, cruise lines, and others. The magic happens with a well diversified portfolio that has some aggressive positions for faster gains, and offset that with more conservative holdings in preparation for market pullbacks when they come.

Next we provide an example. NCLH (Norwegian Cruise Lines) was not on ValuEngine’s radar before early 2020 and the pandemic. Indeed, we had a sell rating on it. But the stock fell so far in early 2020 due to Covid (which essentially closed down the cruise lines), that the models began to like it at those massively depressed prices. It shot to the top of our tables with a Strong Buy rating. It went into several ValuEngine Capital portfolios and has shown great returns.  Should life ever return to normal, it could still produce very strong returns.  This is for the risk takers, and illustrates what a quantitative approach such as ValuEngine can do: remove the emotion from investing and look at the numbers Not many had the courage to invest in a cruise line in early 2020. Here is the ValuEngine report on NCLH:

210219 VE report NCLH

All of the approximately 5,000 stocks, 16 sector groups, and 140 industries have been updated on www.ValuEngine.com. New: Over 500 ETF reports updated weekly.

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Paul Henneman, President/CEO

support@ValuEngine.com | ValuEngine, Inc | (321) 325-0519

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