Value Line Low Total Return Screen (9/27/2013)

Not Much To Write Home About

For the first time in recent memory, there are no “materially weaker” companies in this week’s roll call. But before launching into celebration and exuberance, there’s not many “materially stronger” companies on the list … and the downward adjustments, albeit lower in magnitude … still manage to deliver a slightly lower overall return forecast for the group. There were slight reductions in the long-term forecasts for a number of home builders, including the likes of Pulte (PHM) and D.R. Horton (DHI).

The issue 6 update is usually a little more stable — as the outlook and fundamental characteristics of steady, reliable companies like Procter & Gamble (PG), Kimberly Clark (KMB) and Colgate-Palmolive (CL) are always less volatile.

In the words of 2012 Groundhog Champion, Bernie Meister, “it’s about time that these research agencies upped their outlook on Lumber Liquidators.”

At the same time, the average price-to-fair-value ratio at S&P for the companies in this week’s update batch is 110%. So if you’re going to shop among them, shop well.

Companies of Interest

Materially Stronger: Covanta Holding (CVA), Lumber Liquidators (LL)

Materially Weaker: None

Market Barometers

The median Value Line low total return forecast (VLLTR) sagged slightly to 4.3%, down from 4.4% last week — and continuing to hover near historical lows.

The Wilshire 5000 continues its march to new highs. Remember … the relative strength index (RSI) is signaling potentially overbought at RSI>70 — but can stay in this condition for a very long time. Momentum is still solid with the average stock up 22% over the last nine months. Continue to shop for high-quality with sufficient returns as protection versus the next correction, recession and/or bear market.

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