eyeQ: 10 actionable trading signals for week beginning 22 July 2024
Experts at eyeQ use AI and their own smart machine to generate actionable trading signals. Here, they highlight 10 UK shares and 10 overseas stocks either cheap or expensive given current macro conditions.
22nd July 2024 09:50
by 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 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 |
71% | 2375.05p | -5.75% | |
76% | 239.12p | -5.39% | |
86% | 482.11p | -5.03% | |
83% | 3651.57p | -4.42% | |
67% | 4831.54p | -4.17% | |
68% | 4306.29p | 4.20% | |
66% | 968.61p | 7.75% | |
74% | 762.74p | 8.49% | |
85% | 505.84p | 10.23% | |
83% | 460.80p | 14.76% | |
Source: eyeQ. Long Term tactical models. Data correct as at 21 July 2024.
Inchcape
Last month Deutsche Bank wrote a bullish report on Inchcape (LSE:INCH), putting a price target of over 1,000p on the stock. That helped the British multinational automotive firm be one of the best-performing stocks in the FTSE 250 in recent weeks.
But while the outlook for company fundamentals may look good, Inchcape is also hostage to macro conditions. eyeQ’s macro relevance score is 74%, and the stock is back in a macro regime for the first time in 2024.
And the big picture outlook is less unambiguously positive. Model value (where the stock “should” trade given economic growth and what the Bank of England is doing on interest rates) rose early in July, but has given back half those gains.
Inchcape trades 8.5% rich to eyeQ model value, which suggests to us a lot of the good news at the company level is now in the price. These aren’t great levels to chase.
International Top 10 | |||
Company | Macro Relevance | Model Value | Fair Value Gap |
RYA | 83% | €18.78 | -14.20% |
83% | $38.15 | -9.24% | |
76% | €734.75 | -8.08% | |
69% | $177.52 | -7.09% | |
78% | $218.80 | -6.15% | |
92% | $824.65 | 0.73% | |
71% | $99.63 | 3.10% | |
82% | $98.72 | 3.30% | |
68% | $212.51 | 5.26% | |
84% | $45.09 | 6.65% | |
Source: eyeQ. Long Term tactical models. Data correct as at 21 July 2024.
Taiwan Semiconductor Manufacturing
Despite reporting strong earnings, Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM) fell on reports of tougher export restrictions from the US government and fears around what policy a Trump presidency adopts towards Taiwan.
There are multiple crosswinds making investing in TSM especially tricky at the moment. From a macro perspective, the trend remains positive. eyeQ model value is up 14.46% in the last month.
The recent sell-off leaves the stock 7.09% cheap to where macro conditions deem it should trade.
That’s not enough to trigger a bullish signal yet. And with political headline risks, the prudent investor will stay on the sidelines for now. Still, one to watch in case we get an interesting entry level for long-term players.
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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.
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