eyeQ: 10 actionable trading signals for week beginning 12 August 2024
Experts at eyeQ use AI and their own smart machine to generate actionable trading signals. Here, they highlight 10 UK shares and 10 overseas stocks either cheap or expensive given current macro conditions.
12th August 2024 09:27
by Huw Roberts from interactive investor
"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 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, single 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 |
67% | 7,823.66p | -7.56% | |
77% | 67.16p | -3.32% | |
72% | 1,780.44p | -2.56% | |
76% | 229.34p | -2.20% | |
71% | 58.13p | -2.02% | |
72% | 12,537.20p | 1.28% | |
73% | 511.03p | 1.91% | |
87% | 1,526.64p | 3.19% | |
86% | 2,940.74p | 5.81% | |
79% | 598.74p | 6.52% | |
Source: eyeQ. Long Term tactical models. Data correct as at 8 August 2024.
UK property
The arrival of the Labour government and the Bank of England’s rate cut has re-ignited investor interest in the UK property market. But which stocks represent the best way to play this theme?
This week’s top 10 reveals that different stocks are reacting in different ways. The homebuilder Persimmon (LSE:PSN) was largely unaffected by recent market turmoil. It’s share price remains near 2024 highs. But, on eyeQ, it’s 3.19% rich to macro conditions. A fair degree of good news is already in the price.
In contrast, estate agent Foxtons Group (LSE:FOXT) screens as 3.32% cheap to the macro environment. eyeQ model value is down nearly 10% in August, so clearly it was more impacted by the recent market volatility. We need to see market conditions calm down therefore but, from a valuation perspective, there are early signs that some value is being built.
International Top 10 | |||
Company | Macro Relevance | Model Value | Fair Value Gap |
66% | €6.29 | -17.06% | |
84% | $63.98 | -10.62% | |
79% | $145.38 | -7.29% | |
67% | $176.75 | -5.87% | |
66% | $257.19 | -1.85% | |
78% | $112.09 | 1.56% | |
68% | $67.38 | 1.70% | |
91% | $834.14 | 2.58% | |
81% | €50.89 | 2.88% | |
79% | $61.41 | 5.12% | |
Source: eyeQ. Long Term tactical models. Data correct as at 8 August 2024.
Target
Retail stocks have been under pressure of late. There are growing signs that consumers (especially lower-income consumers) are starting to feel the squeeze from higher interest rates. Target Corp (NYSE:TGT) is down 23% since the end of March, reflecting those concerns.
But that story is well known and, to some extent, is already discounted in stock prices. Indeed, on our models, Target is 7.29% cheap to macro conditions. That’s not yet enough to trigger a bullish signal, but it is the cheapest valuation on eyeQ in a year.
Target release earnings on Wednesday, so investors will wait to see what they report. But note a macro relevance score of 79% means while company news is important, macro matters too. This is one to keep an eye on – it could be a potential play for believers in the soft-landing scenario.
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.
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