eyeQ: 10 actionable trading signals for week beginning 25 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.
25th March 2024 11:28
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 |
73% | 19.54p | -46.68% | |
88% | 237.40p | -10.94% | |
82% | 860.81p | -10.59% | |
83% | 1,142.55p | -9.97% | |
74% | 652.62p | -8.68% | |
69% | 345.20p | 8.87% | |
81% | 95.84p | 9.84% | |
77% | 249.94p | 13.58% | |
77% | 427.70p | 13.51% | |
70% | 306.66p | 16.85% |
Source: eyeQ. Long Term tactical models. Data correct as at 22 March 2024
Tate & Lyle (LSE:TATE) shares have not enjoyed a great start to 2024. That could be because the UK competition authorities seem to be leaning towards a negative verdict on Tate's acquisition of Tereos last year.
That is clearly important news but note that Tate is not just trading off company news; it is also a macro investment. Macro relevance (how confident we are in the model value) is 74% and the stock has been in a regime (i.e. driven by big-picture dynamics such as economic growth and inflation) since last August.
And while the stock price fell in January and has since been treading water at the bottom of recent ranges, eyeQ model value has started to rise. It is up 6.4% since the start of March.
That divergence means the stock now sits 8.7% cheap to overall macro conditions. The stock also has some nice defensive properties - it benefits if credit spreads widen and liquidity conditions deteriorate.
That combination of attractive entry level plus defensive characteristics could appeal to any investors looking for a more cautious stance.
Update on Aviva
On 6 March, ahead of results, we posted on Aviva (LSE:AV.). While acknowledging strong company fundamentals, the eyeQ perspective was that a lot of good macro news was already in the price.
Since then, Aviva shares have risen 7.9%. Macro model value hasn't changed - it remains around 428p. That leaves the stock 13.5% rich to overall macro conditions. Our smart machine still says these aren't great levels to chase the insurer. But we have to admit the market disagrees, and it is looking like we got this one wrong.
International Top 10
Company | Macro Relevance | Model Value | Fair Value Gap |
69% | $11.20 | -77.99% | |
CompuGroup Medical SE & Co KgaA Registered Shares (XETRA:COP) | 76% | € 39.77 | -47.97% |
66% | C$2.64 | -46.94% | |
72% | $25.96 | -31.26% | |
75% | € 15.12 | -17.42% | |
67% | $21.63 | 19.09% | |
82% | $23.27 | 25.16% | |
72% | $12.87 | 30.77% | |
80% | $1.58 | 36.13% | |
70% | € 72.45 | 37.22% |
Source: eyeQ. Long Term tactical models. Data correct as at 22 March 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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