The COVID-19 virus continues to spread around the world and seems to have “infected” investors with fear and panic. The market’s volatility has spiked, and major indexes around the world have dropped from their recent highs. In times like these, panic and emotion seem to drive the market swings rather than the underlying economic conditions. Some financial advisors and investors might be trying to take money off the table before they lose more while others jump at this opportunity to purchase assets at fire-sale prices.
To assist financial advisors and investors with investment analysis, we will provide a list of 20 NASDAQ stocks with high market cap and estimate how overvalued or undervalued these stocks are using the Relative Value statistic provided by the MacroRisk Analytics® platform because a reasonable question always arises: is what I plan to purchase undervalued, overvalued, or fairly valued? While typical analytics products emphasize accounting analysis or technical ratios to determine price valuation, the MacroRisk Analytics platform provides “a better window on the future”®. Its patented and proprietary tools can help investors take emotions out of the investment decision-making process and focus on how the underlying economic values of their investments, including most stocks and funds traded in the U.S. and Canada. Of particular note is the “relative value statistic” which presents the extent to which an asset is under- or over-valued; this statistic compares the Eta® price (i.e., MacroRisk’s statistical estimate of an asset’s intrinsic price) to the corresponding market price of the asset.
MacroRisk’s Eta® price estimate is computed using advanced data analysis and considers the specific impacts of these 18 macroeconomic variables:
- Short-term government bond yield
- Intermediate-term government bond yield
- Long-term government bond yield
- Corporate bond (BAA) yield
- Unemployment rate
- Corporate cash flow
- Housing starts
- Auto sales
- New durable goods
- Gold index
- Energy prices
- CPI (inflation)
- Monetary base
- M2 Money
- Euro exchange rate
- FTSE 100
- Tokyo stock exchange
- Agricultural exports
Similar to how factors such as the number of bedrooms, number of baths, square footage, etc. determine the price of a house, these 18 macroeconomic variables determine the intrinsic value estimate, the Eta® price of an asset.
The relative value statistic is interpreted as follows:
| Relative Value by MacroRisk Analytics | Valuation Expectation |
| <1 | Expected to be overvalued |
| 1 | Expected to be fairly valued |
| >1 | Expected to be undervalued |
To illustrate the relative value score, consider the following list of 20 large cap NASDAQ stocks and their corresponding relative value statistics as of 3/16/2020:
| Name | Symbol | Relative Value as of 3/16/2020 |
| CME Group Inc | CME | 1.361 |
| Exelon Corp | EXC | 1.306 |
| CSX Corp | CSX | 1.202 |
| The Kraft Heinz Co | KHC | 1.161 |
| Automatic Data Processing Inc | ADP | 1.131 |
| Pepsico Inc | PEP | 1.128 |
| Mondelez International Inc | MDLZ | 1.108 |
| Microsoft Corp | MSFT | 1.102 |
| Intel Corp | INTC | 1.099 |
| Starbucks Corp | SBUX | 1.082 |
| Apple Inc | AAPL | 1.078 |
| Nvidia Corp | NVDA | 1.057 |
| Intuit Inc | INTU | 1.043 |
| Analog Devices Inc | ADI | 1.034 |
| Equinix Inc | EQIX | 1.027 |
| Qualcomm Inc | QCOM | 1.016 |
| Comcast Corp | CMCSA | 0.962 |
| Texas Instruments Inc | TXN | 0.949 |
| Cisco Systems Inc | CSCO | 0.948 |
| Marriott International | MAR | 0.943 |
According to the current economic conditions, even with all the current social volatility disrupting markets, 16 out of these 20 stocks presented seem to be potential buy targets because their relative value statistics are over 1; their market prices are substantially below MacroRisk’s statistically based intrinsic values estimates.
During turbulent times that we are currently experiencing, it is ever more important to keep emotions in check while investing. The relative value tool statistic allows investors to take a step back from the speculation going on in the world and focus on whether an asset is expected to be under- or over-valued based on the current economy. The relative value information presented for 20 NASDAQ stocks above uses the underlying economic conditions expected to drive the values of assets over the long-term.
When you are considering changing your holdings, whether in a crisis or not, the Relative Value Index can help pinpoint undervalued opportunities.
www.MacroRisk.com provides relative value and other statistics as well as a selection of patented and proprietary analysis tools for tens of thousands of stocks, mutual funds, ETFs, and other traded assets. The Relative Value Score for stocks and funds is also included in “The Economy Matters” reports available from numerous platforms. Click here to see how MacroRisk Analytics can help you.
Mr. Rolland Harris assisted with the preparation of this post.