Monday, January 19, 2015

January 16th 2015 Screens for Value:

N.B. Performance spread between UV and OV screens since inception (Sept 2004) is +5.90% pa 

The first table summarizes the changes in the screens that occurred in the last two weeks

As you can see the Undervalued stocks that left the screen had relative performance of +6.65% while the two leaving the Overvalued declined an average of 6.16% relative. 

Current undervalued list

Since starting the monthly screens Sept 2004, these stocks have outperformed the S&P by 4.66 pa  or 2.46% better than our universe.

The same stocks organized by Sector 

As is  evident, the UV list has a major weighting in Energy which may remain a liability for a while.

Current Overvalued List

Since inception (Sept 2004) this monthly screen has underperformed the S&P by -1.27 % or -3.44% vs our universe of over 500 equities.

The same stocks by Sector

Here we see a big weighting in Consumer Cyclicals (see Home Building comment)


The S&P 500 was off 2% in the first 2 weeks of the year. The Overvalued Screen outperformed the market by 0.52% while the Undervalued was off 1.06% relative.  Utilities (+6.78% rel.) largely accounted for the OV positive results and the Energy Sector hurt the Undervalued.

Friday, January 9, 2015

Corequity 2014 Performance Results

The Undervalued screens performed in line with our universe of stocks which were down 3.7% relative to the S&P 500.  The Overvalued Screens, on the other hand, did quite a bit worse: -13.5% relative to the Universe or  -17.1%  relative to the S&P.

This chart shows the performance of the indices of the monthly screens for value (UV - Undervalued and OV - Overvalued).  The table below gives the indices of relative performance and the spreads.

In absolute terms, the changes in market value were +7.25% for the UV and -7.12% for the Overvalued excluding income.  The spread was 14% in favor of the UV.

(c) 2015 Robert L. Colby

Friday, December 5, 2014

Value Line Technical Rank's inverse correlation with relative performance

In April 2013 we noted that the Value Line Technical Rank seemed to have an inverse relationship with performance

The perverse performance continues with the best ranked doing the worst and vice versa.

(c) 2014 Robert L. Colby

Sunday, November 30, 2014

Performance of the Under and Overvalued screens since April & the November Screens

Performance Update

This charts updates the longer  term performance of the Under and Overvalued screens.  There is some improvement in the Undervalued and a distinct deterioration in the Overvalued after more than 2 years of relative out-performance.  The following graph is a close up of the results since last April.

This shows the flat relative performance of the UV (+0.2%) screens vs a significant decline of -10.6% for the Overvalued.

Current Screens

The stocks are ranked by the  relative strength (to the S&P) last month.  At the top of the UV screen are undervalued stocks that did better than the market in November..  

Conversely at the top of the OV list are the Overvalued stocks that did poorly.

Changes in the screens last month

In general we would expect equities leaving the UV list to outperform the market and vice versa, which is largely the case as shown here as is the opposite case for the OV.
(c) 2014 Robert L. Colby

Wednesday, October 8, 2014

10 year results for Under and Overvalued Screens

September 30th 2014 marks the end of the 10th year of the monthly analysis of over 500 US equities.  Over all, the results have been good with the Undervalued list outperforming the S&P 500 by 4.72% per annum. The Overvalued under-performed the same index by 1.48% per annum.

Relative to Corequity’s universe, the Undervalued are 2.64% pa ahead while the Overvalued were behind by 3.56% pa for a spread of 6.20%.

In absolute terms, the Undervalued gained by 10.87 % pa while the Overvalued was up only 4.31%.  In the context of equity fund performance, this was the difference between the 99th percentile and the 39th for a spread of 60 percentiles in the ranking of over 300 US Equity funds tracked by the Globe & Mail for the 10 year period  ending in September. (All Corequity figures are based on price only)

Monday, February 3, 2014

January 31st Screens for Value

 Changes to the Undervalued list during last month

and the changes to the Overvalued screen were as follows


Tuesday, May 21, 2013

Volume 1

See below for examples of value in McKesson (long).

McKesson at $118 is undervalued by 35% in our analysis.  

The RoE chart above is used to normalize earnings which are estimated to be $8.41 in 2014.  Normalized earnings (MPEPS) are shown below vs actual earnings and dividends.

Using the normalized earnings, we calculate the history of relative Payback to the market, and, in McKesson's case, establish a normalized range of 90-130%.

Using this range we calculate the theoretical price range and compare that to the actual high low and close as shown here.

As mentioned, normalized earnings are $8.41 which gives a Reinvestment Return (growth) of 15.8%.   

Implied earnings (IEPS) and growth (ImRR). 

Reversing the process, we calculate the the stock is fairly priced if it earns normalized earnings of $7.12 and growth of 12.9%.

Monday, May 13, 2013

Wednesday, May 1, 2013

April 30th Screens for Value

The latest screens for good and bad values are shown below with the stocks distributed across their Sectors.  Below the April 30th screens are the corresponding screens from a month ago.  This will help in spotting changes in value which are a mainly a function of changes in price, or earnings.

A case in point is the reduction of Overvalued Technology stocks which was due mainly to substantially higher estimated earnings when 2014 was added.

Monday, April 22, 2013

Volume 8 - Financial, Basic Materials & Drug stocks

Two stocks stand out: one for being undervalued and having had relatively good performance over the last month and the other with the opposite characteristics.

On the long side, Actavis (ACT $98), the third largest generic drug maker in the world, looks attractive.  Estimated earnings and growth from reinvestment are $8.50 and 22% vs implied earnings of $7.21 and 18.8%.

On the short side is Forest Labs (FRX $36).  For March 2015, estimated earnings are $1.30, normalized earnings are $2.72 giving a growth rate of 9.7%.  The implied equivalents are $4.63 and 17%.

click here to open file

Robert L. Colby

Sunday, April 21, 2013

Volume 7

Due to poor performance in the Industrial and Technology Sectors and Industries, there are some great values in Volume 7.  

Thursday, April 4, 2013

Value Line Technical Rank - a near "perfect" predictor of stock performance

Our recent posting "Monetary stimulus favors poor quality equities" was a reminder of Value Line's Technical Rank and its near "perfect" record of predicting relative performance in the recovery since January '09.
The only imperfection is that it is in the exact opposite order to what one would want to see in a ranking system where 1 is the best and 5 the worst.

These results are based on the linked one month relative returns on the 500 plus stocks that we cover.  In addition to keeping our own monthly valuation data, we have kept some Value Line data on these stocks including their Timeliness, Safety and Technical Ranks.

Their definition of the Technical Rank is as follows:

The Value Line Technical Rank uses a proprietary formula to predict short-term (three to six month) future price returns relative to the Value Line universe. It is the result of an analysis which relates price trends of different durations for a stock during the past year to the relative price changes of the same stock over the succeeding three to six months. The Technical  rank is best used as a secondary investment criterion. We do not recommend that it replace the Performance rank. As with the other ranks, the Technical rank goes from 1 (Highest) to 5 (Lowest.)

The Value Line Timeliness ranking has a more mixed record.

Like the Technical description, there is no meaningful definition of what goes into the Timeliness equation.

Robert L. Colby