eyeQ: 10 actionable trading signals for week beginning 26 Feb 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.
26th February 2024 12:56
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 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 |
70% | 692.65p | -36.8% | |
78% | 5,504.99p | -8.4% | |
60% | 114.26p | -8.1% | |
80% | 153.87p | -6.7% | |
84% | 257.90p | -2.3% | |
58% | 2,326.83p | 2.7% | |
54% | 3,818.55p | 4.2% | |
81% | 425.32p | 6.4% | |
75% | 517.36p | 7.8% | |
64% | 213.26p | 8.1% |
Source: eyeQ. Long Term tactical models. Data correct as at 26 February 2024.
NatWest
NatWest Group (LSE:NWG) enjoyed a strong rally at the end of last week. Fair enough it produced solid earnings and there's excitement building about a potential retail share offer this summer. But note the rally has overshot relative to big-picture conditions like economic growth, inflation and the Bank of England's policy stance.
In fact, looking at which of those macro drivers matters most, eyeQ's smart machine shows that NatWest is in what markets call a “Goldilocks” environment. The banks want an economy that is warm enough to produce decent profits, but not too hot as to force the Bank to hike rates and upset the party. They need things not too hot, not too cold, but “just right”.
The trouble is on our models they've priced in a fair amount of that Goldilocks scenario and so, for now at least, these aren't the optimal levels to chase the rally.
International Top 10
Company | Macro Relevance | Model Value | Fair Value Gap |
51% | $187.68 | -13.1% | |
58% | $26.82 | -11.8% | |
53% | $192.95 | -5.7% | |
56% | $15.66 | -5.4% | |
71% | $75.96 | 0.0% | |
55% | $59.06 | 0.2% | |
60% | $172.54 | 1.4% | |
59% | $400.09 | 2.5% | |
59% | $168.66 | 4.5% | |
51% | $397.45 | 4.7% |
Source: eyeQ. Long Term tactical models. Data correct as at 26 February 2024.
Coinbase, Marathon and Riot
The other stand out in the week’s top 10 are the crypto plays. Crypto exchange Coinbase (NASDAQ:COIN) plus mining stocks Marathon Digital Holdings Inc (NASDAQ:MARA) and Riot Platforms Inc (NASDAQ:RIOT) screen as slightly cheap to macro conditions.
eyeQ shows a sharp improvement in macro conditions over the last two weeks and these stocks haven't kept up with the better outlook.
For Coinbase and Marathon, the rise in our model value comes from the fact that the corporate credit market is in such a good place. Tighter credit spreads mean that companies can finance themselves by issuing debt at cheaper levels. And, for both these stocks, that one driver explains around a third of the model. The main takeaway therefore is that easy financial conditions are helping these stocks.
So, once again, it’s that Goldilocks trade at work. For now, the big picture stuff like economic fundamentals, financial conditions and risk appetite are all pointing up for equities. Now investors just need a smart machine to show them which stocks have run ahead or are lagging the improved conditions.
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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