eyeQ: 10 actionable trading signals for week beginning 15 April 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.
15th April 2024 11:22
by Huw Roberts from eyeQ
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"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, 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 |
83% | 1776.57p | -13.52% | |
72% | 516.71p | -3.34% | |
76% | 544.34p | -3.29% | |
79% | 1730.54p | -0.91% | |
72% | 2764.50p | -0.31% | |
78% | 452.41p | 1.69% | |
77% | 1208.79p | 5.34% | |
65% | 452.02p | 6.65% | |
84% | 31.67p | 12.39% | |
85% | 27.38p | 17.03% |
Source: eyeQ. Long Term tactical models. Data correct as at 15 April 2024.
Indivior
It’s been a busy start to the year for the biopharmaceutical company. In February, Indivior Ordinary Share (LSE:INDV) announced plans to potentially change its listing to the US. That news plus strong Q4 figures resulted in a rally of around 34%. It also received final court approval for a settlement with US authorities over opioid addiction treatment, plus good results for their new nasal spray that reverses opioid-induced respiratory depression.
But more recently the stock has suffered, falling around 8% so far in April.
The reason for the fall in the share price is not obvious, and the lack of news is even more striking when you consider macro conditions are improving. eyeQ model value has increased nearly 19% over the last month. Current patterns show INDV is a stock that actually benefits from rising inflation.
That divergence (big picture news getting better but the stock price falling) means INDV now screens as 13.5% cheap to overall macro conditions. As always, extra due diligence is required; especially given company-specific news can be so important. But macro matters (macro relevance is 82%), and that valuation plus its defensive properties in a sticky inflation environment mean the stock looks interesting from our perspective.
Imperial Brands
One of eyeQ’s first posts on interactive investor was about the tobacco stock Imperial Brands (LSE:IMB). We issued a bearish signal at the start of February when the stocks screened as around 6% rich to macro conditions. That worked well, with the stock falling nearly 9% at the end of the month.
Today, the valuation gap is small. IMB screens as within 1% of model fair value. We flag today because eyeQ’s model fair value is rolling over pretty aggressively. At 1,730.54p, model value is at its lowest level since November.
Why? The stock wants lower inflation and well-behaved credit markets. Right now, the biggest risk facing markets is sticky inflation, and the threat of higher bond yields (as hopes for rate cuts are unwound) which is causing credit markets to wobble for the first time in a while. That’s not a good combination for Imperial Brands. There’s no signal given valuation is close to where it should be, but falling macro momentum is not friendly. Avoid.
International top 10
Company | Macro Relevance | Model Value | Fair Value Gap |
75% | $179.43 | -11.94% | |
88% | $189.93 | -9.44% | |
90% | $130.92 | -6.83% | |
78% | $71.17 | -3.85% | |
75% | $43.94 | -1.99% | |
74% | $63.06 | 2.37% | |
66% | $411.61 | 2.44% | |
70% | $169.86 | 3.79% | |
69% | € 24.31 | 18.91% | |
73% | C$3.46 | 17.83% |
Source: eyeQ. Long Term tactical models. Data correct as at 15 April 2024.
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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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