Tag Archives: database

Valuation Dashboard: Financials – Update

Summary 4 key factors are reported across industries in the Financial sector. They give a valuation status of industries relative to their history. They give a reference for picking stocks in each industry. This is part of a monthly series of articles giving a valuation dashboard in sectors and industries. The idea is to follow up a certain number of fundamental factors for every sector, to compare them to historical averages. This article covers Financials. The choice of the fundamental ratios used in this study has been justified here and here . You can find in this article numbers that may be useful in a top-down approach. There is no analysis of individual stocks. You can refine your research reading articles by industry experts here . A link to a list of stocks to consider is provided in the conclusion. Methodology Four industry factors calculated by portfolio123 are extracted from the database: Price/Earnings (P/E), Price to sales (P/S), Price to free cash flow (P/FCF), Return on Equity (ROE). They are compared with their own historical averages “Avg”. The difference is measured in percentage for valuation ratios and in absolute for ROE, and named “D-xxx” if xxx is the factor’s name. For example, D-P/E = (AvgP/E – P/E)/AvgP/E. It can be interpreted as a percentage in under-pricing relative to a historical baseline: the higher, the better. It points to over-pricing when negative. ROE is already a percentage. A relative variation makes little sense. That’s why we take the simple difference: D-ROE = ROE – AvgROE. The industry factors are proprietary data from the platform. The calculation aims at eliminating extreme values and limiting the influence of the largest companies. These factors are not representative of capital-weighted indices. They are useful as reference values for picking stocks in an industry, not for ETF investors. Industry valuation table on 12/3/2015 The next table reports the 4 industry factors. For each factor, the next “Avg” column gives its average between January 1999 and October 2015, taken as an arbitrary reference of fair valuation. The next “D-xxx” column is the difference as explained above. So there are 3 columns for each ratio. P/E Avg D- P/E P/S Avg D- P/S P/FCF Avg D- P/FCF ROE Avg D-ROE Commercial Banks 15.85 15.24 -4.00% 3.02 2.06 -46.60% 18.45 13.44 -37.28% 8.79 8.89 -0.1 Thrifts & Mortgage Finance* 19.29 20.66 6.63% 2.92 2.03 -43.84% 21.57 14.75 -46.24% 6.08 5.02 1.06 Diversified Financial Services 23.8 17.85 -33.33% 4.41 2.94 -50.00% 18.4 16.13 -14.07% 4.78 6.38 -1.6 Consumer Finance* 10.62 13.15 19.24% 1.4 1.47 4.76% 7.11 8.22 13.50% 11.13 11.83 -0.7 Capital Markets* 16.22 18.07 10.24% 3.57 3.06 -16.67% 17.55 19.62 10.55% 8.2 7.89 0.31 Insurance 14.46 13.7 -5.55% 1.3 1.07 -21.50% 11.67 8.99 -29.81% 9.05 8.71 0.34 REITs** 34.38 35.42 2.94% 5.19 4.56 -13.82% 45.45 38.74 -17.32% 4.97 4.07 0.9 Real Estate Management** 35.72 31.19 -14.52% 3.44 3.06 -12.42% 22.08 25.55 13.58% 4.01 -1.33 5.34 * Averages since 2003 – ** Averages since 2006 Valuation The following charts give an idea of the current status of industries relative to their historical average. In all cases, the higher the better. Price/Earnings: Price/Sales: Price/Free Cash Flow: Quality (ROE) Relative Momentum The next chart compares the price action of the SPDR Select Sector ETF ( XLF ) with the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) (chart from freestockcharts.com). (click to enlarge) Conclusion The financial ETF has the same return as SPY in the last 3 months. On this period, the 5 best performing S&P 500 financial stocks are Blackrock Inc (NYSE: BLK ), Cincinnati Financial Corp (NASDAQ: CINF ), Equinix (NASDAQ: EQIX ), Plum Creek Timber Co (NYSE: PCL ) and Public Storage (NYSE: PSA ). CINF, PCL and PSA hit an all-time high this week. Some financial industries look overpriced, but all of them are above or close to their baseline in quality, with ROE in a [-1.6,+5.4] interval from the historical average. REITs have improved since last month in valuation and are stable in quality. Consumer Finance is the only industry with 3 valuation factors pointing to underpricing. For Capital Markets, 2 out of 3 are pointing to underpricing. Commercial Banks, Diversified Financial Services and Insurance are overpriced for the 3 valuation ratios. Diversified Financial Services look the less attractive industry, with all metrics in negative territory. However, there may be quality stocks at a reasonable price in any industry. To check them out, you can compare individual fundamental factors to the industry factors provided in the table. As an example, a list of stocks in Financials beating their industry factors is provided on this page . If you want to stay informed of my updates on this topic and other articles, click the “Follow” tab at the top of this article.

Valuation Dashboard: Consumer Discretionary Sector

Summary 4 key fundamental factors are reported across industries in the Consumer Discretionary sector. They give valuation status of an industry relative to its historical average. They give a reference for picking stocks in each industry. This is part of a monthly series of articles giving a valuation dashboard in sectors and industries. The idea is to follow up a certain number of fundamental factors for every sector, to compare them to historical averages. This article covers Consumer Discretionary. The choice of the fundamental ratios used in this study has been justified here and here . You can find in this article numbers that may be useful in a top-down approach. There is no analysis of individual stocks. You can refine your research reading articles by industry experts here . A link to a list of stocks to consider is provided in the conclusion. Methodology Four industry factors calculated by portfolio123 are extracted from the database: Price/Earnings (P/E), Price to sales (P/S), Price to free cash flow (P/FCF), Return on Equity (ROE). They are compared with their own historical averages “Avg”. The difference is measured in percentage for valuation ratios and in absolute for ROE, and named “D-xxx” if xxx is the factor’s name (for example D-P/E for price/earnings). The industry factors are proprietary data from the platform. The calculation aims at eliminating extreme values and size biases, which is necessary when going out of a large cap universe. These factors are not representative of capital-weighted indices. They are useful as reference values for picking stocks in an industry, not for ETF investors. Industry valuation table on 11/26/2015 The next table reports the 4 industry factors. For each factor, the next “Avg” column gives its average between January 1999 and October 2015, taken as an arbitrary reference of fair valuation. The next “D-xxx” column is the difference as explained above. So there are 3 columns for each ratio.   P/E Avg D- P/E P/S Avg D- P/S P/FCF Avg D- P/FCF ROE Avg D-ROE Auto Components 15.13 15.33 1.30% 0.83 0.62 -33.87% 33.88 21.23 -59.59% 10.79 3.9 6.89 Automobiles 17.6 17.67 0.40% 1.19 1.06 -12.26% 16.17 21.97 26.40% 10.79 0.21 10.58 Household Durables 17.52 15.46 -13.32% 0.85 0.59 -44.07% 30.1 16.33 -84.32% 9.74 5.3 4.44 Leisure Equip.&Products 22.9 17.82 -28.51% 1.19 0.84 -41.67% 30.76 22.05 -39.50% 9.14 2.63 6.51 Textile,Apparel,Luxury 17.93 16.34 -9.73% 1.02 0.71 -43.66% 27.03 17.23 -56.88% 11.81 7 4.81 Hotels, Restaurants, Leisure 27.67 21.67 -27.69% 1.38 1.04 -32.69% 26.98 24.18 -11.58% 9.24 4.51 4.73 Div. Consumer Services* 27.49 21.49 -27.92% 1.37 1.4 2.14% 17.28 18.64 7.30% 0.36 11.35 -10.99 Media 21.27 23.31 8.75% 1.61 1.55 -3.87% 24.79 19.9 -24.57% 3.43 -3.45 6.88 Distributors 20.07 14.32 -40.15% 1.05 0.48 -118.75% 37.45 16.28 -130.04% 10.21 3.18 7.03 Internet&Catalog Retail 39.1 37.37 -4.63% 1.38 1.8 23.33% 38.36 32.11 -19.46% 5.83 -14.7 20.53 Multiline Retail 20.32 19.41 -4.69% 0.5 0.48 -4.17% 25.87 26.81 3.51% 7.04 10.44 -3.4 Specialty Retail 18.69 17.95 -4.12% 0.58 0.56 -3.57% 24.34 21.87 -11.29% 11.69 9.85 1.84 *Averages since 2005 Valuation The following charts give an idea of the current status of industries relative to their historical average. In all cases, the higher the better. Price/Earnings: Price/Sales: Price/Free Cash Flow: Quality (ROE) Relative Momentum The next chart compares the price action of the SPDR Select Sector ETF ( XLY ) with SPY (chart from freestockcharts.com). (click to enlarge) Conclusion The Consumer Discretionary sector has outperformed the broad market by more than 4% in the last 3 months. It hit a new all-time high this week. The 5 most prominent S&P 500 consumer discretionary stocks in the recent rally are Amazon (NASDAQ: AMZN ), Cablevision Systems (NYSE: CVC ), General Motors (NYSE: GM ), Nike (NYSE: NKE ), Viacom (NASDAQ: VIAB ). AMZN and NKE have hit an all-time high this week. Car and motorcycle manufacturers (Automobiles) look the most attractive industry in the sector: it is fairly priced in P/E, under-priced in P/FCF, and ROE is above the historical average. The industries with an improvement in valuation factors since last month are Auto Components, Household Durables, Leisure equipment and products, Hotels and Restaurants, Specialty Retail. However, there may be quality stocks at a reasonable price in any industry. To check them out, you can compare individual fundamental factors to the industry factors provided in the table. As an example, a list of stocks in Consumer Discretionary beating their industry factors is provided on this page . If you want to stay informed of my updates on this topic and other articles, click the “Follow” tab at the top of this article.

Valuation Dashboard: Energy And Materials

Summary Four key fundamental factors are reported across industries in Energy and Basic Materials. They give a valuation status of an industry relative to its historical average. They give a reference for picking stocks in each industry. This is part of a monthly series of articles giving a valuation dashboard in sectors and industries. The idea is to follow up a certain number of fundamental factors for every sector, to compare them to historical averages. This article covers Energy and Basic Materials. The choice of the fundamental ratios used in this study has been justified here and here . You can find in this article numbers that may be useful in a top-down approach. There is no analysis of individual stocks. You can refine your research reading articles by industry experts here . A link to a list of stocks to consider is provided in the conclusion. Methodology Four industry factors calculated by Portfolio123 are extracted from the database: price/earnings (P/E), price to sales (P/S), price to free cash flow (P/FCF), return on equity (ROE). They are compared with their own historical averages, “Avg.” The difference is named with a prefix “D” before the factor’s name (for example D-P/E for the price/earnings ratio). It is measured in percentage for valuation ratios and in absolute for ROE. The methodology is quite different from the S&P 500 dashboard. In some industries, S&P 500 companies are very few, so mid- and small caps are included here. Also, the fundamental industry factors are not median values, but proprietary data from the platform. The calculation aims at eliminating extreme values and size biases, which is necessary when going out of a large-cap universe. The drawback is that these factors are not representative of capital-weighted indices. They may be very useful as reference values for picking stocks in an industry, but are less relevant for ETF investors. Industry valuation table on 10/26/2015 The next table reports the four industry factors. For each factor, the next “Avg.” column gives its average between January 1999 and October 2015, taken as an arbitrary reference of fair valuation. The next “D-xxx” column is the difference between the historical average and the current value, in percentage. So there are three columns relative to P/E, and also three for each ratio. P/E Avg. D- P/E P/S Avg. D- P/S P/FCF Avg. D- P/FCF ROE Avg D-ROE Energy Equipment & Services 21.25 24.2 12.19% 0.81 1.73 53.18% 7.86 35.34 77.76% -10.59 7.34 -17.93 Oil/Gas/Fuel 17.27 18.53 6.80% 1.95 3.35 41.79% 14.22 29.03 51.02% -13.51 4.47 -17.98 Chemicals 20.04 18.48 -8.44% 1.44 1.21 -19.01% 35.4 25.37 -39.53% 9.17 6.74 2.43 Construction Materials 53.65 21.44 -150.23% 1.34 1.16 -15.52% 52 40.5 -28.40% 10.61 5.77 4.84 Packaging 21.91 17.96 -21.99% 0.92 0.61 -50.82% 21.92 20.09 -9.11% 18.58 8.34 10.24 Metals & Mining 20.74 19.83 -4.59% 1.27 2.65 52.08% 15.18 25.53 40.54% -19.81 -8.6 -11.21 Paper & Wood 31.74 21.27 -49.22% 0.77 0.72 -6.94% 21.78 22.81 4.52% 8.41 4.99 3.42 The following charts give an idea of the current valuation status of Energy and Materials industries relative to their historical average. In all cases, the higher the better. Price/Earnings Price/Sales Price/Free Cash Flow Quality (ROE) Relative Momentum The next chart compares the price action of the SPDR Select Sector ETF in Materials (NYSEARCA: XLB ) and energy (NYSEARCA: XLE ) with SPY (chart from freestockcharts.com). (click to enlarge) Conclusion Since last month, XLB has outperformed SPY by 1%, and XLE has lagged by 3%. Both have been widely underperforming the broad index in the last six months. At the industry level, Energy Equipment & Services, Oil/Fuel/Gas and Metals/Mining look undervalued relative to their historical averages, but they are in negative territory for quality. Oil/Fuel/Gas and Metals/Mining have improved since last month in valuation due to the sharp decline in oil, metal and stock prices. Oil/Fuel/Gas deteriorated in quality, but Metals/Mining is stable. Chemicals, Construction Materials and Packaging are above their historical average in quality, but overpriced for the three valuation factors. Valuation factors have deteriorated for Construction Materials since last month because of a few outliers and the relatively small number of companies in this industry. No industry in these two sectors looks globally very attractive. However, comparing individual fundamental factors to the industry factors provided in the table may help find quality stocks at a reasonable price. A list of stocks in energy and basic materials beating their industry factors is provided on this page . If you want to stay informed of my updates on this topic and other articles, click the “Follow” tab at the top of this article.