eyeQ: 10 actionable trading signals for week beginning 22 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.
22nd April 2024 12:21
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, 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 |
79% | 1,761.58p | -16.35% | |
67% | 5,125.53p | -4.47% | |
78% | 145.87p | -4.19% | |
68% | 1,777.11p | -2.78% | |
76% | 9,740.09p | -2.26% | |
78% | 1,721.08p | 2.98% | |
77% | 605.93p | 4.50% | |
76% | 409.33p | 7.71% | |
87% | 980.13p | 8.23% | |
72% | 435.18p | 11.22% | |
Source: eyeQ. Long Term tactical models. Data correct as at 22 April 2024.
International Top 10 | |||
Company | Macro Relevance | Model Value | Fair Value Gap |
67% | $166.89 | -13.81% | |
76% | $18.80 | -11.81% | |
65% | $141.51 | -10.82% | |
79% | $166.80 | -1.09% | |
77% | $62.77 | -0.73% | |
88% | $96.30 | 1.59% | |
77% | $51.50 | 5.37% | |
73% | C$3.45 | 8.67% | |
77% | $49.50 | 8.78% | |
79% | $908.56 | 8.83% | |
Source: eyeQ. Long Term tactical models. Data correct as at 22 April 2024.
Something different this week. The top 10 Fair Value Gaps for both UK and international stocks are shown above as usual. But the big focus this week will be company earnings. They’re always important but arguably this week more so than ever.
Why? Because the 2024 equity rally has been built on two stories: artificial intelligence (AI) and Federal Reserve rate cuts. And the latter has been largely unwound. From discounting either five or six rate cuts in 2024 at the start of the year, markets are now debating just one or two. That puts even more of an onus on earnings to produce strong results and keep the bullish momentum intact. And it’s probably fair to say that is even especially true with the so-called Magnificent Seven big tech stocks. The market needs them to deliver more good news.
So, what’s the macro perspective on these mega-cap tech leaders?
Microsoft Corp (NASDAQ:MSFT). Macro relevance is 63% and slipping. Bottom-up, or company fundamental news is becoming more important than the big picture stuff like rates, inflation, etc. Our model says the stock ‘should’ trade around $411, so there’s no big valuation gap currently.
NVIDIA Corp (NASDAQ:NVDA). Macro explains just under half (44%) of price action in this critical stock. Other drivers are more important currently. Given Friday’s price slump and the damage its done to the charts, technical analysis and momentum are probably the most critical thing right now.
Apple Inc (NASDAQ:AAPL) is back in a macro regime (79% macro relevance) and performing in line with big picture fundamentals. Sadly, those fundamentals are not very friendly at present. Model value has fallen 10.9% in the last month, thanks mainly to strong commodities, rising inflation expectations and the unwinding of those Fed rate cut expectations. Right now, overall macro conditions say the stock should be trading around $167.
Tesla Inc (NASDAQ:TSLA). Macro relevance is 47% but rising fast. The bigger standout though is macro model value which is falling hard. It’s down 29% in the last month alone. There are plenty of company issues – price cuts, competition in China, etc – but macro is also hurting the stock. The only comfort is a fair degree of bad news is in the price already. On eyeQ the stock is 14% cheap. But we would want to see macro momentum bottom out before acting on any cheap valuation.
Meta Platforms Inc Class A (NASDAQ:META). Model value is not falling aggressively like many of its peers. Aggregate macro conditions remain near recent highs. The issue though is macro relevance of just 36%. Other stuff is driving Meta rather than big picture dynamics.
Alphabet Inc Class A (NASDAQ:GOOGL) is similar. Encouragingly for the bulls, macro model value hasn’t peaked or turned lower. But again, macro currently explains just 33% of price action.
Amazon.com Inc (NASDAQ:AMZN) should trade around $190 according to macro conditions. The stock currently sits around 8.5% cheap to that level. But macro relevance of 49% means that valuation gap comes with a warning.
Overall, the fact that most of these critical bellwethers don’t have high macro relevance scores, just adds to the sense that company news is key right now. Even more than usual, the market needs a supportive set of earnings results.
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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