eyeQ: 10 actionable trading signals for week beginning 2 Sept 2024

"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

Source: eyeQ. Long Term tactical models. Data correct as at 2 September 2024.

easyJet

European budget airlines appear to be suffering.

easyJet (LSE:EZJ)’s shares have nosedived since April falling 25%. If that wasn’t enough, it is set to be relegated from the FTSE 100.

However, the company said that it is still on track for a record summer performance and news broke early last week that International Consolidated Airlines Group SA (LSE:IAG) is targeting to take over the budget airline operator.

There’s good news on the macro front too. Like most stocks, easyJet suffered in the early August flash crash, but macro conditions quickly bounced back. Model value is up 11.3% in August.

The stock has lagged behind these gains and now sits 5.46% cheap to eyeQ model value.

The smart machine has yet to fire a signal, but for bulls keep an eye on easyJet, it could be a bargain.

International top 10

Source: eyeQ. Long Term tactical models. Data correct as at 2 September 2024.

Volvo AB

The Swedish car maker posted encouraging Q2 numbers. Global sales rose 15% year-on-year, noting that the jump was driven by increased sales in hybrid and electric cars.

If you weren’t aware, Geely Automobile Holdings Ltd (SEHK:175) (a Chinese car manufacturer) is the second-largest investor in the company.

Once again, the early August turbulence weighed on both the macro environment and the stock price. Both have bounced but while the stock price remains well below its July levels, eyeQ model value is almost back to those levels. That leaves the stock 3.63% cheap to macro conditions.

Furthermore, macro relevance has increased by 5% over the previous two weeks taking it to our 65% threshold for a macro regime, i.e. big-picture stuff such as China-US tensions, consumer behaviour and credit conditions are starting to matter.

Despite the rising tensions around higher tariffs on electric vehicles imported from China, the stock has some potential upside. The fair value gap isn’t big enough for a bullish signal, but at these levels, Volvo AB Class B (OMX:VOLV B) is offering some value.