February 26, 2010

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--Free Individual Stock Report for Weekly Newsletter Subscribers
We are now offering a FREE DOWNLOAD of one of our $ 25.00 Detailed Valuation
Reports.

This week's free download is our report on PALM Inc, (PALM). The company's
products for consumers, mobile professionals and businesses include Palm Pre, Treo and
Centro smartphones, as well as software, services and accessories. PALM, a Forecast
Model short selection from the Technology Sector for this month's Forecast 22 MNS Portfolio
Newsletter, suffered a big decline yesterday.
PALM got battered after the smart-phone manufacturer cut its earnings forecast. The
stock was also downgraded to "Sell" by UBS this morning. ValuEngine Forecast 22 MNS
Portfolio Newsletter subscribers were alerted to the issues with PALM when the stock was
first included as a short selection in the January 2010 edition of the portfolio. The Forecast
Model shorted PALM due to its valuation level as well as its poor future forecast returns.
Since the latest portfolio re-balance February 16th, PALM is down @35%. Since its initial
selection as a short, the stock is down almost 50% and thus is a fantastic short-side
performer.

Weekly Subscribers can download a FREE Detailed Valuation Report on PALM Inc.
(PALM) HERE.

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For more on the VE Forecast 22 Market Neutral Strategy Newsletter Portfolio, Click the
Logo Below

MARKET OVERVIEW

Thursday 3 day 3 day

Index started week ytd
Close change change %
DJIA 10402.43 10321.03 -81.4 -0.78% -1.05%
NASDAQ 2250.92 2234.22 -16.7 -0.74% -2.62%
RUSSELL 2000 632.83 630.46 -2.37 -0.37% -2.60%
S&P 500 1110 1102.94 -7.06 -0.64% -1.22%

Summary of VE Stock Universe

Stocks Undervalued 54.96%
Stocks Overvalued 45.04%
Stocks Undervalued by 20% 26.60%
Stocks Overvalued by 20% 19.70%

SECTOR OVERVIEW
Sector Change MTD YTD Valuation Last 12- P/E Ratio
MReturn
Basic Industries 0.06% 2.38% -2.73% 5.72% overvalued 102.57% 26.51
Capital Goods 0.00% 1.66% 0.10% 0.99% overvalued 73.47% 22.11
Consumer Durables 0.48% 1.97% 0.34% 8.39% overvalued 99.49% 22.78
Consumer Non-Durables -0.09% 2.93% 0.77% 0.46% undervalued 87.45% 19.12
Consumer Services -0.31% 2.76% 0.84% 1.91% undervalued 85.86% 22.12
Energy 0.56% -0.12% -3.67% 6.48% overvalued 90.51% 21.11
Finance -0.09% 1.48% 2.32% 2.33% undervalued 51.01% 18.42
Health Care -0.40% 2.10% -0.55% 7.95% undervalued 69.24% 20.52
Public Utilities -0.24% 0.15% -4.37% 1.63% undervalued 48.48% 16.08
Technology -0.24% 3.42% 1.44% 6.00% undervalued 83.85% 27.89
Transportation 0.51% 4.02% 0.08% 0.44% undervalued 71.52% 21.72
Sector Talk
--Consumer Durables

Consumer Durables is now the most overvalued sector in our universe. It replaces
recent leaders Energy and Basic Industries. Within Consumer Durables, Leisure Products is
the most overvalued Industry and Home Building is the most undervalued.

Consumer Durables Sector Industry Component Performance Breakdown

Industry Change MTD YTD

AUTO PART MFG 0.70% 3.26% -0.14%
AUTOMOTIVE MFG 0.79% -2.63% -4.68%
HOME BUILDING -0.14% 2.00% 0.43%
HOME FURNISHINGS 0.01% 3.17% 2.54%
LEISURE PRODUCTS 0.95% 2.56% 1.33%
RECREATIONAL VEHICLE -0.26% 3.85% 3.16%
RUBBER -1.23% -5.28% -13.05%
TOOLS AND HARDWARE 2.26% 10.46% 6.01%
UNDESIGNATED CONR DU 1.23% 0.30% 7.44%

VE Premium Website Stock Analysis subscribers can find complete Industry valuation
data HERE.

Top-Five Most Overvalued Consumer Durables Sector Tickers

Ticker Name Mkt Price Valuation(%) Industry
PHHM PALM HARBOR HOMES INC 2.03 300 LEISURE PRODUCTS
MPX MARINE PRODUCTS CORP 6.65 184.59 LEISURE PRODUCTS
DAN DANA HOLDING CORP 11.05 165.79 AUTO PART MFG
USHS US HOME SYSTEMS INC 2.11 147.07 HOME FURNISHINGS
AMERICAN WOODMARK
AMWD 18.81 120.32 HOME FURNISHINGS
CORP
Top-Five Forecast Consumer Durables Sector Tickers

Ticker Name Mkt Price Valuation(%) Industry

DHI D R HORTON INC 12.35 -21.45 HOME BUILDING
NTZ NATUZZI SPA 4.42 -38.97 HOME FURNISHINGS
STAMFORD INDUSTRIAL GROUP
SIDGQ 0 -87.5 TOOLS AND HARDWARE
INC
LTEC LOUD TECHNOLOGIES INC. 0.16 -87.5 HOME FURNISHINGS
FLXS FLEXSTEEL INDS INC 11.99 -22.66 HOME FURNISHINGS

Bottom-Five Forecast Consumer Durables Sector Tickers

Ticker Name Mkt Price Valuation(%) Industry

AXR AMREP CORPORATION 13.66 28.44 HOME BUILDING
AMWD AMERICAN WOODMARK CORP 18.81 120.32 HOME FURNISHINGS
TLX TRANS LUX CORP 1 N/A UNDESIGNATED CONDUR
JEN JENNIFER CONVERTIBLES INC 1.03 N/A HOME FURNISHINGS
CSHEF CHINA ENTERPRISES LTD 0.19 N/A RUBBER

VE Premium Website Stock Analysis subscribers can find complete valuation, forecast,
and ratings data on the above tickers as well as the rest of the Consumer Durables Sector
components HERE.

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Training Tip
--The ValuEngine Forecast Model
Unlike the Stock Valuation model--which merely states what a stock’s price should be
assuming a totally efficient market, the ValuEngine Stock Forecast Model predicts what a
stock’s price will be at a specified future time period given current market conditions. The
Forecast Model builds upon the output of the Stock Valuation Model by combining it with
econometric and simulation techniques to output target prices for one, three, and six-month
and one, two, and three-year time horizons, as well as a percentage probability for gains and
losses. The Stock Forecast Model uses a distinct forecasting model for the six forecast time
horizons for every industry. It considers--among other things, short-term price reversals,
intermediate-term momentum continuation, and long-term price reversals. As with the
ValuEngine Stock Valuation Model, parameters are updated in real time. While the dynamic
environment of the financial markets precludes forecasting with absolute certainty, the
ValuEngine Forecast Model’s inclusion of micro/macro, short term/long term parameters and
the use of probability statistics, results in forecasts that are robust and actionable. Remember
that while it is impossible for anyone to predict the markets with absolute certainty, the
forecast figures are especially useful for comparing tickers to each other in order to determine
the best investment targets for a given timeframe.

What Variables are Predictors of Future Returns for a Given Stock ?

Predictive variables fall into three classifications: (1) Those related to the stock's past
performance such as its EPS history, past volatility, and historic risk/return levels, (2) The
company's financial fundamentals, e.g. its balance sheets, cash flow history and operating
income statements, and (3) indicators of the behavior of the overall markets. ValuEngine's
forecasting models employ proprietary formulas that balance these three classifications of
data and also take into consideration macroeconomic factors such as the interest rate climate
in which the equity markets operate.

How are the Probabilities for a Stock's Future Prospects Calculated?

First, ValuEngine considers all available current and historic data. Then, much as a
chess-playing computer considers all possible moves before selecting the best one,
ValuEngine's models run thousands of calculations to create a broad landscape of
possibilities. ValuEngine then narrows its focus to determine the probability of various
outcomes--such as a stock returning 20% or more or perhaps doubling in price within a
certain time frame and so on, while also calculating the risk of loss during that time.
Are there Different Forecasting Models for Different Industries or for Different Time
Horizons?

Yes. Each industry has its own forecasting model which reflect its fundamental
characteristics and is based on the econometrics peculiar to that industry. These models also
establish a company's market position across other businesses within its sector. Forecasting
models also change as forecasting horizons move out into the future. For shorter time
periods--such as 1-12 months, technical variables dominate. For longer projections-- out to
three years, emphasis shifts to the company's financial fundamentals.
Are ValuEngine Stock Forecasts Dependent on the ValuEngine Valuation Model?

Not really. Because the model price derived by the valuation model is a current value
for a stock, the fair value calculation and the resultant mispricing percentage play a relatively
minor role in forecasting future returns. The future forecast returns and target prices rely more
on variable criteria like EPS projections, momentum ranking, and Sharpe ratios as well as on
a set of econometric models.
Are ValuEngine Stock Forecasts Accurate ?

Yes, to the extent that accurately predicting the future behavior of the stock market is
possible. Thus far, 100% accurate predictions of future events are not possible—and if they
were, ValuEngine would not be selling such technology! However, ValuEngine has broken
new ground in the effort to isolate, identify, and quantify variables found to influence the rise
and fall of stock prices in the equity markets. ValuEngine has tested the interrelationship of
key fundamental data variables and their impact on the value of individual stocks as well as
that of whole markets over a twenty-year period. ValuEngine's stock-picking models and
benchmark portfolio strategies have consistently beaten the markets in both back testing,
forward tracking, and real-world investing. Of course, unforeseen events will always be part of
the financial landscape and so risk will always be present with any investment strategy.
ValuEngine works to reduce risk to manageable and acceptable levels and to make their
forecasts as accurate as possible.
Where Can I Find Forecast Model Data?

The ValuEngine Forecast Model outputs are found in the forecast section of the
ValuEngine Stock Reports and on our website. The one year forecast figure--also referred to
as the "1-Yr Target Price," can be found in the Valuation snapshot section as well.
Suttmeier Says
--Commentary and Analysis from Chief Market
Strategist Richard Suttmeier
If you have any comments or questions, send them to Rsuttmeier@Gmail.com
Treasuries

The yield on the 10-Year Note is below my semiannual pivot at 3.675,

as risk aversion is trumping supply. The 200-week simple moving
average is key support at 4.01. Monthly resistance is 3.504.

Commodities and Forex

Comex gold shows the 200-week simple moving average as support at

822.3. Gold is nestled among quarterly, annual and semiannual pivots at $1084.9, $1115.2,
$1139.7 and $1186.5.

Nymex crude oil has been trading around its 200-week simple moving average at $76.25,
which has been a pivot since mid-2009. A weekly close below my annual pivot at $77.07
signals reduced global energy demand.

The Euro is approaching its recent low at 1.3450 with the 200-week simple moving average
as resistance at 1.3883.

Major Indices

The Dow is below my annual pivot at 10,379, but a close above today could signal strength
to the 200-week simple moving average and annual resistance at 11,147 / 11,235. We need a
close today below 10,067 to sustain the monthly key reversal.

Housing and Banking

The Housing Index (HGX) has been trying to bottom, but has been blocked in a trading
range from the March 2009 low of 55 / 54 and overhead resistance at 117 / 120. Note the top
that I predicted at the end of July 2005. The 200-week simple moving average is resistance at
148.33.

The America’s Community Bankers Index (ABAQ) peaked at the end of 2006 and like the
homebuilders is trying to bottom. The March 2009 low was 122.75 and horizontal resistance
is 160. If that level is taken out the upside is to annual resistance at 195 with the 200-week
simple moving average at 223.55.
 The Regional Bankers Index (BKX) peaked in February 2007, and like the homebuilders and
community banks is trying to bottom. The March 2009 low was 17.75 and horizontal
resistance is 50. If that level is taken out the upside is to annual resistance at 73.12 with the
200-week simple moving average at 77.86.

--The ValuEngine View Newsletter

It can be a big job sorting through which stocks in the ValuEngine universe represent
the best risk/reward. Some investors like to do it themselves, but others would prefer having a
professional money manager do the heavy lifting. That’s why we offer the ValuEngine View
newsletter.

Each month Eric Stokes, a hedge fund manager and Principal at Reed-Stokes Capital
Partners, reviews the top selections generated by VE’s models and carefully researches each
one. The very best 15 ideas are then selected for inclusion in our model portfolio.

Stokes selects the stocks AND explains why he has included them in the portfolio via
in-depth analysis. Here's an example from last month's portfolio:

Canadian energy trusts have been on our radar screen from time to time and we are taking a
position in Baytex Energy Trust (BTE) this month. Birds of this stripe are characterized by healthy
dividend pay outs, which in turn are generated by oil and natural gas production. Moreover, there is
no waiting around for payments; dividends are paid each month. In the case of BTE the yield is
currently 5%. What is interesting about all of these trusts is the upcoming change in Canadian law
that will take effect in 2011, whereby these companies will no longer be exempt from Canadian
income taxes. BTE announced plans at the beginning of December to convert to a growth and
income-oriented company. The worry of course is that BTE and others will no longer be able to
afford the same dividend and we don't know for sure how that will play out. But when BTE outlined
its plans for next year it actually increased its per share distribution by 50%, from $0.12 to $0.18.
That will raise the yield to almost 8%. The company attributed the increase to organic production
growth of oil (and to a lesser extent natural gas) accompanied by the relatively healthy price of oil.
At least for the near term investors ought to be reassured that BTE will continue to generate
excellent dividend income.

Stokes picked Baytex (BTE) on December 15th. So, what happened with BTE? Check
out its recent performance below:
 Courtesy Google Finance
In fact, December was one of the View's best months ever. Five of Stokes' picks
provided double digit gains and the overall portfolio gained over 7%! Stokes beat the S&P
500 benchmark by a large margin. Results for this month's portfolio also look promising. So
if you want some help making sense of our quantitative analysis then you might find that the
very best return on your investment comes from subscribing to the ValuEngine View.
Below, we provide December's portfolio results.
To find out more about the ValuEngine View, click the logo below