Interactive Investor

eyeQ: 10 actionable trading signals for week beginning 11 March 2024

interactive investor has teamed up with experts at eyeQ whose artificial intelligence and own smart machine generate actionable trading signals. Here, they name 10 UK shares and 10 overseas stocks trading out of sync with macro conditions.

11th March 2024 12:43

Huw Roberts from eyeQ

"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." EyeQ

Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary

This new series of weekly articles uses eyeQ’s smart machine to highlight 10 stocks whose share price trades at either a discount or premium to eyeQ’s Model Value price (where macro conditions say the share 'should' trade).

A minus figure in these tables indicates a share trading below eyeQ’s Model Value, implying they are ‘cheap’ versus macro conditions. A plus figure screens as rich because the current share price is above eyeQ’s Model Value. 

All companies must have a model relevance above 65%, which means the macro environment is critical and any valuation signals carry strong weight.

Here are definitions of terms used in the analysis:

Model value

Where our smart machine calculates that any stock market index, singe stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.

Model relevance

How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price. 

Fair Value Gap (FVG)

The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.

Long Term model

This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.

UK Top 10

Company

Macro Relevance

Model Value

Fair Value Gap

Entain (LSE:ENT)

66%

916.21p

-24.52%

Taylor Wimpey (LSE:TW.)

79%

152.96p

-9.07%

Rio Tinto Registered Shares (LSE:RIO)

70%

5210.02p

-8.87%

BT Group (LSE:BT.A)

66%

112.36p

-2.01%

Legal & General Group (LSE:LGEN)

84%

248.87p

-0.39%

easyJet (LSE:EZJ)

73%

539.50p

1.03%

Persimmon (LSE:PSN)

90%

1344.97p

1.14%

National Grid (LSE:NG.)

78%

1038.84p

1.53%

Phoenix Group Holdings (LSE:PHNX)

77%

498.14p

2.33%

Aviva (LSE:AV.)

82%

427.45p

9.17%

Source: eyeQ. Long Term tactical models. Data correct as at 11 March 2024.

Are you not entertained?

It’s the Cheltenham festival this week, one of horse racing’s richest sweepstakes. Ordinarily that would have gambling companies like Coral, Ladbrokes, etc, excited, but last Thursday their owner Entain (LSE:ENT) warned of a potential £40 million hit to profits as a result of new government measures designed to regulate the online gambling industry. The news prompted a 10% fall in the share price.

Clearly a change in the regulatory landscape is big news. It is, however, also worth considering the big picture backdrop. eyeQ’s model for Entain shows macro relevance (how confident we are in the model value) is 66% - it has just moved back above the 65% threshold for a new macro regime, meaning stuff like economic growth, inflation, the Bank of England, etc, are having a big impact on the share price.

And those macro conditions are improving – model value (where our smart machine calculates what the price should be) is up 7.9% in March. 

The stock screens as cheap versus macro conditions. This is a good example of where an investor needs to add his oversight to the machine-generated signal. The new rules around online gambling will clearly impact profitability in the short term, but we can say a fair degree of bad news is now priced in. One to watch…

International Top 10

Company

Macro Relevance

Model Value

Fair Value Gap

Riot Platforms Inc (NASDAQ:RIOT)

55%

$16.05

-29.93%

Marathon Digital Holdings Inc (NASDAQ:MARA)

56%

$28.81

-22.71%

Apple Inc (NASDAQ:AAPL)

45%

$190.99

-11.87%

Microsoft Corp (NASDAQ:MSFT)

67%

$412.15

-1.46%

PayPal Holdings Inc (NASDAQ:PYPL)

61%

$59.80

-1.33%

Alibaba Group Holding Ltd ADR (NYSE:BABA)

71%

$74.48

-1.26%

Pfizer Inc (NYSE:PFE)

45%

$26.53

2.52%

Advanced Micro Devices Inc (NASDAQ:AMD)

60%

$191.94

7.45%

Cleanspark Inc (NASDAQ:CLSK)

45%

$18.20

10.07%

Coinbase Global Inc Ordinary Shares - Class A (NASDAQ:COIN)

62%

$218.18

14.98%

Source: eyeQ. Long Term tactical models. Data correct as at 11 March 2024.

Not all Bitcoin miners are created equal

Anything crypto related has been on fire recently. The launch of bitcoin exchange-traded funds (ETFs) has acted as a catalyst for increased demand; the upcoming halving focuses attention on reduced supply. That’s a powerful combination.

There is, however, a debate coming about how retail investors choose to gain exposure to crypto. The mining stocks used to be a way to capture crypto upside without the messiness of buying bitcoin itself. But now the ETFs give investors an even easier way to access the market.

Initially, the mining stocks all rallied alongside the move higher in spot crypto. But is there a risk that ETF flows undermine the attractiveness of the miners as a proxy bitcoin play?

Since the end of January and the approval of the bitcoin ETF, Cleanspark Inc (NASDAQ:CLSK) is up around 150%, while Marathon Digital Holdings Inc (NASDAQ:MARA) is up “just” 29% and Riot Platforms Inc (NASDAQ:RIOT) a “paltry” 10%. That’s a huge discrepancy and one that can be seen in macro valuations in the table above. eyeQ’s smart machines has CleanSpark as 10% rich to macro conditions, while Riot and Marathon are both very cheap to macro. 

Macro relevance is currently below our 65% threshold, so further research is needed to investigate what’s going on here, why the miners are trading so differently. But eyeQ is flagging some important differences in behaviour.

These third-party research articles are provided by eyeQ (Quant Insight). interactive investor does not make any representation as to the completeness, accuracy or timeliness of the information provided, nor do we accept any liability for any losses, costs, liabilities or expenses that may arise directly or indirectly from your use of, or reliance on, the information (except where we have acted negligently, fraudulently or in wilful default in relation to the production or distribution of the information).

The value of your investments may go down as well as up. You may not get back all the money that you invest.

Equity research is provided for information purposes only. Neither eyeQ (Quant Insight) nor interactive investor have considered your personal circumstances, and the information provided should not be considered a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised financial adviser. 

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.