February 18, 2011

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VALUATION WARNING: Our models find that overvaluation is approaching

levels typically seen when a market correction is imminent. Overvalued
stocks now make up 68% of our universe and almost 36% of the universe is
calculated to be overvalued by 20% or more. ALL sectors are now
calculated to be overvalued.

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--Free Individual Stock Report for Weekly Newsletter
Subscribers
As a bonus to our Free 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 MGIC Investment Corporation (MTG,
$MTG). MGIC Investment Corporation is a holding company which, through its wholly
owned subsidiary, Mortgage Guaranty Insurance Corporation, is the leading provider
of private mortgage insurance coverage in the United States to the home mortgage
lending industry. Private mortgage insurance covers residential first mortgage loans
and expands home ownership opportunities by enabling people to purchase homes
with less than 20% down payments. If the home owner defaults, private mortgage
insurance reduces and, in some instances, eliminates the loss to the insured institution.
The company has been battered by the housing crisis and as expected share
prices took a real nose-dive during the deflation of the housing bubble. The company
recently announced that it expected to continue to post losses for the foreseeable
future and a return to profitability is not expected until 2012. Shares nose-dived near
the end of January on the bad news. However, shares jumped hard the last two
weeks despite the pessimistic outlook. Our model seems to be influenced by this
volatility and in a screen for short-term forecast prospects yesterday MTG topped a list
of 47 tickers for short and long-term forecast returns.
ValuEngine has issued a STRONG BUY recommendation for MGIC Investment
Corporation. Based on the information we have gathered and our resulting research,
we feel that MGIC Investment Corporation has the probability to OUTPERFORM
average market performance for the next year. The company exhibits ATTRACTIVE
market valuation, expected EPS growth and company size.
Based on available data, we believe that MTG should be trading at $23.06. This
makes MTG 57.58% undervalued. Fair Value indicates what we believe the stock
should be trading at today if the stock market were perfectly efficient and everything
traded at its true worth. For MTG, we base this on actual earnings per share (EPS) for
the previous four quarters of -$2.37, forecasted EPS for the next four quarters of $0.20,
and correlations to the 30- year Treasury bond yield of 4.66%.

Weekly Subscribers can download a FREE Detailed Valuation Report on MTG HERE.
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Valuation Report, you can subscribe to our Free Weekly Newsletter HERE.

MARKET OVERVIEW
Index started week Thursday Close 4 day change 4 day change % ytd
DJIA 12266.83 12318.1 51.27 0.42% 6.40%
NASDAQ 2810.19 2831.58 21.39 0.76% 5.79%
RUSSELL 2000 822.22 834.02 11.8 1.44% 5.10%
S&P 500 1328.73 1340.43 11.7 0.88% 6.58%

Summary of VE Stock Universe

Stocks Undervalued 32.12%
Stocks Overvalued 67.88%
Stocks Undervalued by 20% 13.91%
Stocks Overvalued by 20% 35.56%
SECTOR OVERVIEW
Sector Change MTD YTD Valuation Last 12- P/E
MReturn Ratio
Aerospace 0.24% 0.85% 5.31% 16.10% overvalued 35.86% 19.25
Auto-Tires-Trucks 0.07% 1.17% 1.42% 13.89% overvalued 52.54% 23.23
Basic Materials 0.76% 2.86% 1.18% 21.76% overvalued 66.56% 35.91
Business Services 0.76% 3.32% 4.45% 16.76% overvalued 23.68% 38.98
Computer and Technology 0.52% 8.08% 12.93% 18.06% overvalued 45.96% 41.4
Construction 0.65% 1.86% 5.85% 13.55% overvalued 18.52% 46.92
Consumer Discretionary 0.87% 5.03% 5.66% 11.32% overvalued 29.95% 30.86
Consumer Staples 0.73% 1.96% 1.32% 11.45% overvalued 21.03% 27.69
Finance 0.29% 3.50% 5.44% 11.78% overvalued 21.70% 25.2
Industrial Products 0.44% 3.56% 6.71% 14.62% overvalued 35.86% 29.14
Medical 0.60% 3.69% 9.03% 2.03% overvalued 20.40% 45
Multi-Sector Conglomerates 0.20% 1.20% 5.46% 18.52% overvalued 38.74% 29.98
Oils-Energy 0.87% 3.48% 9.51% 31.82% overvalued 48.15% 43.92
Retail-Wholesale 0.20% 5.62% 3.97% 13.01% overvalued 33.92% 28.89
Transportation 0.38% 2.27% 1.59% 18.62% overvalued 36.60% 27.5
Utilities 0.44% 0.74% 2.06% 9.17% overvalued 19.58% 26.49

Sector Talk—Industrial Products

Below, we present top-five lists for the Industrial Products Sector from our
Institutional software package (VEI). These results were filtered by market price and
volume--no results below 3$/share or less than 100k shares/day volume.

Top-Five Industrial Products Stocks--Short-Term Forecast Returns

Last 12-M
Ticker Name Mkt Price Valuation(%)
Retn(%)
CENX CENTURY ALUM CO 17.45 12.73 31.2
BLL BALL CORP 36.9 -40.05 -28.72
MBLX METABOLIX INC 8.93 -31.87 -16.78
FTEK FUEL TECH INC 8.03 -33.75 27.66
UEPS NET 1 UEPS TECH 10.44 -50.45 -40.17
Top-Five Industrial Products Stocks--Long-Term Forecast Returns
Last 12-M
Ticker Name Mkt Price Valuation(%)
Retn(%)
CENX CENTURY ALUM CO 17.45 12.73 31.2
BLL BALL CORP 36.9 -40.05 -28.72
MBLX METABOLIX INC 8.93 -31.87 -16.78
SEH SPARTECH CORP 8.66 101.14 -16.81
ERII ENERGY RECOVERY 3.34 24.22 -46.73

Top-Five Industrial Products Stocks--Composite Score

Last 12-M
Ticker Name Mkt Price Valuation(%)
Retn(%)
AVY AVERY DENNISON 41.08 -4.03 30.99
BLL BALL CORP 36.9 -40.05 -28.72
ITW ILL TOOL WORKS 54.94 2.91 24.21
PH PARKER HANNIFIN 91.65 16.68 59.89
KMT KENNAMETAL INC 40.55 14.29 57.6

Top-Five Industrial Products Stocks--Most Overvalued

Last 12-M
Ticker Name Mkt Price Valuation(%)
Retn(%)
UFPT UFP TECH INC 20.97 102.76 170.23
SEH SPARTECH CORP 8.66 101.14 -16.81
SSYS STRATASYS INC 47.7 81.81 64.48
AIMC ALTRA HOLDINGS 21.97 60.36 91.71
CNH CNH GLOBAL NV 54.01 60.09 110.48

Subscribers can check out the latest valuation, forecast, and ratings figures on
the Transportation Sector from our Models HERE.
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What's Hot--The ValuEngine Forecast Model Market

Neutral Newsletter

Our Forecast Model Market Neutral Strategy Newsletter portfolio posted a whopping
gain of 10.82% versus the S&P 500's gain of 3.33%. We TRIPLED the S&P 500's return!
Our recommended stop-lossed/equally-biased allocation lagged our standard strategy by a
margin of 438 bps as market volatility saw some stopped-out tickers rebound and provide
substantial gains. Since inception, the newsletter’s compounded return to date stands at
57.05%. The trailing 12 month percentage gain is 27.45% for the newsletter and 24.25% for
the S&P 500 index.

Our longs were led by a huge gain of 48% for MTW and a 20% return for LNG. VMC
and LDSH also provided support. On the short side, we made substantial gains from CCME,
FBP, MNI, PHM, and GNK—35%, 29%, 15%, 14%, and 10.5%. Since inception, this was
the best performance ever posted by our newsletter.
Overall results along with long and short-side portfolio tables are below:
Standard Strategy Long-Bias MNS Short-Bias

No Stops (70-30) (60-40) (50-50) (40-60) (30-70)

50/50 Allocation 11.85 11.34 10.82 10.3 9.79

Ticker Company Name 01/18/11 Exit Price Change %Change Sector

LDSH LADISH COMPANY 50.11 54.83 4.72 9.42 AEROSPACE

CFFN CAPITOL FEDL FN 11.68 12.23 0.55 4.71 AUTO TIRES TRUCKS

TRE TANZANIAN ROYAL 6.63 7.07 0.44 6.64 BASIC MATERIALS

LAMR LAMAR ADVER CO 38.03 41.3 3.27 8.60 BUSINESS SERVICES

SCMR SYCAMORE NTWKS 23.87 22.01 -1.86 -7.79 COMPUTERS TECHNOLOGY

VMC VULCAN MATLS CO 41.06 45.42 4.36 10.62 CONSTRUCTION

H HYATT HOTELS CP 48.16 49.52 1.36 2.82 CONSUMER DISCRETIONARY

BRFS BRF-BRASIL FOOD 16.96 17.23 0.27 1.59 CONSUMER STAPLES

FAF FIRST AMER FINL 15.02 15.96 0.94 6.26 FINANCE

MTW MANITOWOC INC 13.90 20.65 6.75 48.56 INDUSTRIAL PRODUCTS

VPHM VIROPHARMA 18.41 17.04 -1.37 -7.44 MEDICAL

MULTI-SECTOR
MMM 3M CO 87.57 92.33 4.76 5.44
CONGLOMERATES

LNG CHENIERE ENERGY 7.48 8.97 1.49 19.92 OILS ENERGY

AHONY AHOLD N V ADR 12.90 13.2 0.3 2.33 RETAIL WHOLESALE

EXM EXCEL MARITIME 5.59 5.09 -0.5 -8.94 TRANSPORTATION

PT PORTUGAL TELCOM 11.10 11.6 0.5 4.50 UTILITIES

LONG PORTFOLIO 6.70

GSPC S&P500 1293.24 1336.32 43.08 3.33

Ticker Company Name 01/18/11 Exit Price Change %Change Sector

AVAV AEROVIRONMENT 28.48 29.14 -0.66 -2.32 AEROSPACE

FSYS FUEL SYSTEM SOL 30 28.05 1.95 6.50 AUTO TIRES TRUCKS

RBY RUBICON MNRLS 5.68 5.35 0.33 5.81 BASIC MATERIALS

CCME CHINA MEDIAEXPR 19.63 12.65 6.98 35.56 BUSINESS SERVICES

ARMH ARM HOLDNGS ADR 25.97 30.92 -4.95 -19.06 COMPUTERS TECHNOLOGY

PHM PULTE GROUP ONC 8.69 7.48 1.21 13.92 CONSTRUCTION

LYV LIVE NATION ENT 11.83 11.48 0.35 2.96 CONSUMER DISCRETIONARY

MNI MCCLATCHY CO-A 5.07 4.32 0.75 14.79 CONSUMER STAPLES

FBP FIRST BNCRP P R 7.1 5.02 2.08 29.30 FINANCE

RURL RURAL/METRO CP 14.51 14.42 0.09 0.62 INDUSTRIAL PRODUCTS

SRZ SUNRISE SENIOR 7.91 9.03 -1.12 -14.16 MEDICAL

MULTI-SECTOR
TXT TEXTRON INC 25.34 27.96 -2.62 -10.34
CONGLOMERATES

USU USEC INC 5.93 5.84 0.09 1.52 OILS ENERGY

BKS BARNES & NOBLE 16.88 18.77 -1.89 -11.20 RETAIL WHOLESALE

GNK GENCO SHPG&TRDG 14.29 12.79 1.5 10.50 TRANSPORTATION

CPN CALPINE CORP 14.65 14.43 0.22 1.50 UTILITIES

SHORT PORTFOLIO 4.12

GSPC S&P500 1293.24 1336.32 43.08 3.33

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Newsletter, you can run your own portfolio like a hedge fund to manage
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Suttmeier Says
--Commentary and Analysis from Chief Market Strategist
Richard Suttmeier
If you have any comments or questions, send them to
Rsuttmeier@Gmail.com
Treasury Yields
10-Year-- (3.571) The near term decline in yields reached 3.546 on
Thursday versus this week’s
risky level at 3.568. The 50-day simple moving average is 3.426.

Commodities and Forex

Comex Gold-- ($1385.0) Is back above its 50-day simple moving average at $1371.6
with monthly risky level at $1412.4.
Nymex Crude-- (($86.45) Continues to trade below my semiannual pivot at $87.52
and is now oversold on its daily chart with today’s value level at $84.65.

The Euro-- (1.3602) Still above its 50-day simple moving average at 1.3392 with the
February 2nd high at 1.3860.

Major Indices
The major equity averages remain extremely overbought technically, and
stocks have been trading under the cloud of a ValuEngine Valuation Warning for the
past month. None-the-less stocks move higher and Thursday’s highs were multi-year
highs. The NASDAQ is just a percent below its October 2007 high at 2861.51. The
NASDAQ 100 (NDX) has exceeded its November 2007 high by 7.1%.

Given this environment, we cannot rule out strength to my annual risky levels at
13,890 Dow Industrial Average, 1562.9 SPX, 3243 NASDAQ, 2589.81 NDX, 6131 Dow
Transports and 978.58 Russell 2000. The key will be a weekly close above my quarterly
risky level at 2853 on the NASDAQ.

New Highs for the Move for the Major Equity Averages:

• The Dow Industrial Average (12,318) remains extremely overbought and

tested 12,331.31 on Thursday with daily and annual risky levels at 12,371 and
13,890. The 21-day simple moving average rises to 12,087 as support.

• The S&P 500 (1340.4) remains extremely overbought and tested 1341.50 on
Thursday with a daily pivot at 1341.8 and my annual risky level at 1562.5. The 21-
day simple moving average rises to 1309 as support.

• The NASDAQ (2832) remains extremely overbought and tested 5306.54 on

Thursday with a daily pivot at 2837 and my quarterly risky level at 2853. The 21-
day simple moving average rises to 2761 as support.

• The NASDAQ 100 (NDX) (2398) remains extremely overbought and tested
2403.52 on Wednesday with a daily risky level at 2413 and my quarterly risky
level at 2438. The 21-day simple moving average rises to 2335 as support.

• Dow Transports (5298) has become overbought and tested 5306.54 on

Thursday with today’s risky level at 5355. The 21-day simple moving average
rises to 5117 as support.
 • The Russell 2000 (834.02) remains extremely overbought and tested 835.52 on
Thursday with today’s pivot at 836.15. The 21-day simple moving average rises
to 801.17 as support.

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