Interactive Investor

eyeQ: 10 actionable trading signals for week beginning 12 Feb 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.

12th February 2024 12:20

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.

Short Term model

This model looks at share prices over the last four 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. It’s what we call a tactical opportunity.

UK Top 10

Company

Macro Relevance

Model Value

Fair Value Gap

Legal & General Group (LSE:LGEN)

89%

244.77p

-3.98%

BT Group (LSE:BT.A)

71%

107.75p

-3.56%

NatWest Group (LSE:NWG)

79%

213.59

-2.88%

Aviva (LSE:AV.)

68%

428.42P

-2.47%

National Grid (LSE:NG.)

78%

1,022.86p

-2.24%

Shell (LSE:SHEL)

83%

2,409.32p

3.38%

Lloyds Banking Group (LSE:LLOY)

78%

40.22p

3.85%

BP (LSE:BP.)

83%

460.74p

4.20%

Entain (LSE:ENT)

78%

953.54p

7.15%

JD Sports Fashion (LSE:JD.)

77%

83.67p

20.68%

Source: eyeQ. Short Term tactical models. Data correct as at 12 February 2024.

JD Sports

The FTSE 100 listed retailer has experienced a rough start to the year. Tepid consumer spending during the holiday season has forced the retailer to heavily slash prices. As a result, they continue to forecast cautious consumer spending and ongoing margin pressures.

eyeQ’s macro model agrees with that downbeat outlook. Macro conditions have deteriorated sharply, and our model value has halved in the first few weeks of the new year. Fair value now stands at 83.67p, which means that even with the stock falling 40% from the mid-December highs, it still screens as 20% rich (above the model value).

The big picture stuff – things like economic growth, inflation and interest rates - is getting worse for JD Sports, and the stock is lagging that move. It is too soon to think about buying the dip. 

International Top 10

Company

Macro Relevance

Model Value

Fair Value Gap

Advanced Micro Devices Inc (NASDAQ:AMD)

87%

$181.35

-5.14%

PayPal Holdings Inc (NASDAQ:PYPL)

88%

$60.69

-3.03%

NVIDIA Corp (NASDAQ:NVDA)

85%

$743.21

-3.03%

Super Micro Computer Inc (NASDAQ:SMCI)

85%

$754.45

-1.91%

Microsoft Corp (NASDAQ:MSFT)

76%

$426.71

-1.47%

Palantir Technologies (NYSE:PLTR)

44%

$19.66

19.36%

MicroStrategy Inc Class A (NASDAQ:MSTR)

76%

$504.24

21.98%

Riot Platforms Inc (NASDAQ:RIOT)

80%

$9.63

33.81%

Marathon Digital Holdings Inc (NASDAQ:MARA)

86%

$13.36

44.09%

Cleanspark Inc (NASDAQ:CLSK)

73%

$5.47

60.78%

Source: eyeQ. Short Term tactical models. Data correct as at 12 February 2024

PayPal

OK earnings but downbeat guidance for 2024 prompted a sharp sell-off in PayPal Holdings Inc (NASDAQ:PYPL) last week. There are company-specific issues investors need to research and take a view on, but note the macro relevance of 88% on eyeQ’s model (above 65% means the macro environment is critical, so any valuation signals carry strong weight). Macro matters too.

And, relative to overall macro conditions, the stock is now 3.03% cheap. Not a huge Valuation Gap, but for those who believe the US economy continues to power ahead, then there is merit in looking for good entry levels on companies with exposure to the economic cycle.

These “cyclical” stocks are favoured by the professionals when the economy is on an upswing and, traditionally, payments system firms would fall into that category. One to watch.

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.