U.S. equities had mixed results in March as the largest capitalization stocks, on average, were higher while the mid and small cap sectors of the market were lower on average. Economic headlines for the month were mostly negative with a few exceptions. Non-farm payrolls came in lower than the strong prior month but were above average forecasts. The unemployment rate ticked up to 3.6%. In a continuation of recent trend services sector indicators signaled modest expansion while manufacturing was lower. Factory orders for January were lower. Retail sales were down for the month in February. Inflation levels declined, with the CPI rate at 6.0%. This was lower than the previous month and in line with expectations. Housing starts, existing home sales, and new home sales increased. The Fed raised the Fed Funds rate by 25 basis points, the same amount as its most recent increase. Investors favored higher quality large cap growth stocks during the month. The top performing stock selection factors were quality rating, market capitalization, long-term price gain and long-term growth rate. Value stocks were less favored as p/e ratio using normal eps, peg ratio, price/value and operating earnings were near the bottom of the factor performance list. Less than 20% of the industry groups we cover posted positive average price gains during March. Notable among the best performing groups were trucking, misc. metals & mining, electric utilities and semiconductors. Financials were the weakest sector with banks at the bottom of the performance list. Among the other weakest industry group performers for March were auto & truck manufacturing, drug stores, and oil well equipment and services.
Value of the Market
Ford’s price to value ratio (PVA) is computed by dividing the price of a company’s stock by the value derived from a proprietary intrinsic value model. A PVA greater than 1.00 indicates that a company is overpriced while a PVA less than 1.00 implies that a stock is trading below the level justified by its earnings, quality rating, dividends, projected growth rate, and prevailing interest rates. While looking at the PVA for an individual company can give a good indication of its value, the average PVA for the market as a whole can provide insight into current valuation levels.
Source: Ford Equity Research