eyeQ: 10 actionable trading signals for week beginning 18 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.
18th March 2024 10:50
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 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 |
90% | 516.56p | -10.66% | |
68% | 10,559.57p | -6.34% | |
72% | 653.00p | -5.70% | |
67% | 461.84p | -3.83% | |
79% | 2,302.81p | -3.68% | |
69% | 2,720.67p | 4.13% | |
67% | 127.75p | 6.54% | |
90% | 678.61p | 6.98% | |
66% | 1,578.28p | 7.51% | |
81% | 272.02p | 14.75% |
Source: eyeQ. Long Term tactical models. Data correct as at 18 March 2024.
Recruitment firm PageGroup (LSE:PAGE) is an interesting case study. It underlines the importance of looking at eyeQ model value. Remember our smart machine looks at any stock’s relationship with the big picture environment - how it trades with economic growth, relative to shifts in inflation, to what the pound is doing, or how commodity markets are trading.
Page is currently 3.83% cheap to our model value, so that will alert investors to a potential buying opportunity. But it is important to look at eyeQ model value which is rolling over and is now 461.84p, that’s a new low for 2024.
That means macro conditions are getting worse for Page. In which case, yes it’s cheap - its discounted a degree of bad news. But you don’t want to buy any security where macro conditions are deteriorating. The stock is cheap but there’s no trading signal until macro conditions at least stabilise and ideally start improving.
International Top 10
Company | Macro Relevance | Model Value | Fair Value Gap |
52% | $28.87 | -49.45% | |
52% | $16.80 | -44.82% | |
47% | $18.91 | -8.51% | |
73% | $78.55 | -6.98% | |
52% | $179.88 | -3.13% | |
54% | $415.03 | -1.69% | |
68% | $414.61 | 0.43% | |
47% | $27.34 | 2.14% | |
63% | $59.85 | 4.77% | |
59% | $226.28 | 6.64% |
Source: eyeQ. Long Term tactical models. Data correct as at 18 March 2024.
PayPal Holdings Inc (NASDAQ:PYPL) is one to keep an eye on. For a year-plus it's been all about company news. But now the stock is on the cusp of a new macro regime. Macro relevance - how confident we are in the model value - is 63%.
The stock is modestly (4.8%) rich, but the bigger standout is the nature of this new macro regime. It is hugely reliant on easy financial conditions - it needs ample liquidity, tight credit spreads and low bond yields.
The biggest and simplest takeaway for anyone investing in PayPal is watch the bond market. If money markets and bonds start moving the wrong way, PayPal will be vulnerable.
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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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