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SECTOR OVERVIEW
FTO FRONTIER OIL CORP 11.75 254.62 3 2.35 448 2.59 -0.08 N/A OIL
CRIMSON EXPLORATION
CXPO 4.42 4.74 2 42.58 444 2.29 -6 N/A OIL
INC
VALERO ENERGY
VLO 16.8 197.7 3 -16.87 478 1.92 4.58 N/A OIL
CORPORATION
FXEN FX ENERGY INC 2.93 300 2 13.57 324 1.85 -1.38 N/A OIL
Top-Ten Energy Sector Stocks--Long-Term Forecast Returns
Forecast Forecast
Mkt Valuation VE Last 12-M Comp P/E
Ticker Name 1-Month 1-Yr Industry
Price (%) Rating Retn(%) Rank Ratio
Retn(%) Retn(%)
XOM EXXON MOBIL CORP 68.84 -5.26 4 -9.73 694 1.65 11.29 16.91 OIL
SLB SCHLUMBERGER LTD 65.2 23.84 4 61.91 688 0.87 9.48 22.68 OIL
RDS.A ROYAL DUTCH SHELL PLC 60.79 -4.63 4 20.28 740 0.58 9.46 14.14 OIL
E ENI SPA 51.38 3.33 4 18.5 720 0.86 8.85 12.68 OIL
CVX CHEVRON CORP 77.21 -1.74 4 12.03 714 1.21 8.57 14.94 OIL
BP BP PLC 58.05 -5.36 5 37.2 776 0.99 8.5 12.64 OIL
TOT TOTAL SA 65.07 -6.68 4 27.09 762 0.76 8.28 12.79 OIL
XTO XTO ENERGY INC 47.11 21.87 4 35.96 692 0.59 8.24 13.66 OIL
EOG EOG RESOURCES INC 99.27 57.69 3 51.33 618 0.83 7.27 33.79 OIL
HAL HALLIBURTON CO 29.64 21.75 4 72.33 702 0.71 6.8 20.41 OIL
FXEN FX ENERGY INC 2.93 300 2 13.57 324 1.85 -1.38 N/A OIL
GMET GEOMET INC 1.39 300 2 -6.71 348 4.53 5.06 N/A OIL
ALTERNATIVE
ESLR EVERGREEN SOLAR INC 1.62 38.06 2 -43.55 360 -0.08 1.7 N/A ENERGY
ALJ ALON USA ENERGY INC 7.47 260.42 2 -15.31 364 0.01 -2.07 N/A OIL
ALTERNATIVE
BIOF BIOFUEL ENERGY CORP 2.87 300 2 655.26 398 -0.25 -8.24 N/A ENERGY
ALLIS-CHALMERS
ALY 3.73 49.42 2 -8.8 402 -1.59 0.83 N/A OIL
ENERGY INC
ALTERNATIVE
HW HEADWATERS 5.93 37.52 2 -11.09 426 -0.3 2.06 N/A ENERGY
HERCULES OFFSHORE
HERO 5 108.89 2 12.36 434 0.58 4.29 N/A OIL
INC
BRNC BRONCO DRILLING CO INC 5.14 2.5 2 -14.76 434 0.24 0.64 N/A OIL
* 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.
ATLAS PIPELINE
AHD 6.03 300 3 71.31 514 -2.75 1.88 29.18 GAS
HOLDINGS LP
EXH EXTERRAN HOLDINGS INC 21.36 300 3 7.77 550 1.55 3.07 13.19 OIL
ALJ ALON USA ENERGY INC 7.47 260.42 2 -15.31 364 0.01 -2.07 N/A OIL
FTO FRONTIER OIL CORP 11.75 254.62 3 2.35 448 2.59 -0.08 N/A OIL
VALERO ENERGY
VLO 16.8 197.7 3 -16.87 478 1.92 4.58 N/A OIL
CORPORATION
IOC INTEROIL CORPORATION 76.45 188.06 3 602.67 600 -0.12 -2.36 533.37 OIL
TSO TESORO CORP 13.34 165.57 3 7.84 476 1.66 -0.33 71.72 OIL
What's Hot
--Catching up with TK Ng
Former ValuEngine Analyst and Quant-Guru TK Ng posted the following on his blog
Random Thoughts recently. It has been edited and re-posted here.
In my humble opinion, the Warren Buffett/"buy and hold"-style of picking undervalued stocks
for the long term is dead for investors with limited long-term time horizons--ie "baby
boomers." The nature of modern financial markets makes this style of investing difficult ever
more problematic.
Modern financial markets are interlinked. What happens in the equities markets effects
currency, commodities, bonds and real estate--and vice versa. This makes markets more
volatile as a crisis in one asset class can spread like a contagion throughout the world
financial system. We now know that a drop in real estate prices in Los Angeles or Las Vegas
can send economic shock waves around the globe. Investors seeking to secure their
retirement must consider whether they have the time to survive a major market draw down.
In addition to the issues raised by "linkage" among asset classes, the presence of
algorithmic trading can cause markets to be out of kilter (fundamental equilibrium) for longer
periods. Algorithmic or programmed high-frequency trading feeds on momentum and liquidity
and such trades can be made with very little relation to fundamentals. Nobody really cares
how or why they make money as long as they do make money. That is, while stocks may
appear to be over or undervalued, one cannot assume that they will revert to their equilibrium
based on "rational" theories of investment. Stocks can-- and will, move in a manner that is
not supported by their fundamentals for a very long time.
Investors must also grapple with the fact that the US can no longer expect to function as the
default world economic power ad infinitum. Emerging markets are playing a greater role in
the world economy. There are tectonic forces at work across the globe--such as the rise of
the BRIC countries (especially China). Although the U.S. market is still by far the largest, most
liquid and deep, exchanges in Shanghai, Hong Kong, Mumbai and Sao Paulo are growing at
a phenomenal rate. Naturally, more and more American funds are moving to these markets
and this may--in the long run, sap the dynamism of American stocks.
To deal with these changing conditions, I find that investors need to ditch the Buffett-style
"buy and hold" strategy in lieu of a strategy that is more suited for the current investment
climate.
Two investment styles that are more in tune with the nature of modern financial markets--
and thus more suited to teh needs of older investors'' shorter investment horizons are:
1. An investment portfolio that is global, multi-asset class, with ability to go Long or Short.
This strategy can be implemented using Exchange Traded Funds. I have written about this
HERE and HERE.
As you can see from the table of historical data below-- which uses the VE Engine-Rating
model, this strategy does work. Over time the ratings are largely predictive--meaning that the
5s are better than the 4s, 3s, etc., and the VE portfolios based on the VE ratings outperform
the S&P benchmark by a significant margin.
Of course, 2008 was a tough year. But keep in mind that these portfolio results assume that
investors are fully allocated at all times. Keep in mind as well that during market turns we
tend to see a breakdown in predictability as "garbage rallies" occur whereby stocks with poor
fundamentals and smaller size tend to rally more than big stocks--where investors flock to
seek shelter from the storm--VE portfolios are biased towards larger market cap stocks
because they provide significant reductions in draw downs and volatility (albeit at the expense
a slight gains in performance.)
Engine Ratings Performance (Monthly Rebalacing) - Year Engine Rating and S&P 500 Index
<--------------Underperform--------------------Match----------------------------Outperform-----------------> S&P 500
Year
1 2 3 4 5 Index
Our Forecast 22 Market Neutral Strategy Newsletter portfolio recently 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.
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
Emerging Markets
Emerging Markets Including China are not prudent investments at
this time - Investors are betting on emerging markets based upon an
improved outlook for developing nations’ exports. The Emerging
Markets stock funds saw a inflow of $80.3 billion in 2009 following an
outflow of $48 billion in 2008.
My focus is the China 25 Fund (FXI), which is up 44.5% in 2009, but is 10% off its
November 16th high of $46.66. FXI is still 42.6% below its all time high set at $73.18 in
November 2007. Note the negative weekly chart, which stays negative on a close this week
below $42.87. The 200-week is $38.30.
Courtesy Google Finance
In Hong Kong officials voice concerns about a double dip in 2010 because of the real estate
market, as two major waterfront sites have seen weak sales raising concern about a bubble
ready to pop. In Beijing, Daniel Rosen of the Rhodium Group says that 2010 could be an
even tougher economic year for China. He says, “To climb out of the global contraction,
Beijing has engineered a property bubble characterized by oversupply in commercial real
estate and unsustainable price gains for residential property. The consequences of this will
bite in the New Year.”
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