Interactive Investor

eyeQ: 10 actionable trading signals for week beginning 27 May 2024

We've teamed up with experts at eyeQ whose AI and own smart machine generate actionable trading signals. Here, they highlight 10 UK shares and 10 overseas stocks either cheap or expensive given current macro conditions.

28th May 2024 10:42

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

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

easyJet (LSE:EZJ)

73%

561.39p

-22.71%

BP (LSE:BP.)

80%

499.57p

-3.43%

Games Workshop Group (LSE:GAW)

78%

10041.98p

-3.42%

Grainger (LSE:GRI)

72%

250.27p

-1.94%

Essentra (LSE:ESNT)

87%

169.62p

-1.93%

Kingfisher (LSE:KGF)

71%

245.13p

6.47%

Aviva (LSE:AV.)

79%

451.47p

7.50%

IG Group Holdings (LSE:IGG)

81%

708.06p

11.16%

Impax Asset Management Group (LSE:IPX)

75%

443.60p

13.86%

Big Yellow Group (LSE:BYG)

75%

1060.46p

14.75%

Source: eyeQ. Long Term tactical models. Data correct as at 27 May 2024.

BP

It’s all eyes on the OPEC+ meeting on 2 June, at which the cartel will discuss whether to extend production cuts of 2.2 million barrels per day.

Unsurprisingly, BP (LSE:BP.) is strongly correlated to oil prices. BP shares fell by almost 8% last month as crude oil was dragged lower on fears of weaker demand.

Our smart machine confirms that macro is an important factor for BP’s share price - 80% macro relevance - and it is negatively impacting BP as seen in the model value move (-3.14%) in the last four weeks.

The consolation is that the market has already moved to price in some bad news. The stock now sits 3.43% below eyeQ model value (where our smart machine says the price should be).

That is not yet cheap enough to trigger a signal. The Fair Value Gap needs to extend further before our smart machine deems the move to be excessive. Ideally, we’d also see model value at least stabilise and turn higher before the bulls can really get excited about a potential buy-the-dip opportunity. One to watch.

International Top 10

Company

Macro Relevance

Model Value

Fair Value Gap

Salesforce Inc (NYSE:CRM)

82%

$305.08

-12.08%

Advanced Micro Devices Inc (NASDAQ:AMD)

70%

$180.39

-8.43%

Airbus SE (XETRA:AIR)

71%

€ 171.34

-7.68%

Tesla Inc (NASDAQ:TSLA)

80%

$191.34

-6.61%

American Airlines Group Inc (NASDAQ:AAL)

71%

$14.66

-5.91%

Foot Locker Inc (NYSE:FL)

74%

$20.18

8.57%

Apple Inc (NASDAQ:AAPL)

79%

$181.14

4.61%

Anheuser-Busch InBev SA/NV ADR (NYSE:BUD)

77%

$61.03

6.17%

Dollar General Corp (NYSE:DG)

85%

$131.75

9.28%

Chargeurs SA (EURONEXT:CRI)

86%

€ 11.22

14.72%

Source: eyeQ. Long Term tactical models. Data correct as at 27 May 2024

CRM

Salesforce is scheduled to report its Q1 earnings on Wednesday. The stock has risen 8% in 2024, underperforming the broader market.

The firm announced the launch of a new AI-assisted feature, which the CEO Mark Benioff hopes will translate into higher revenue in the coming years. However, for now, revenue growth will be limited by cautious business spending on tech - the Salesforce Inc (NYSE:CRM) powerhouse had to embark on a cost-cutting program - due to macroeconomic headwinds.

Does the eyeQ smart machine think Salesforce is a good buy?

Salesforce has a macro confidence score of 82%, which means one thing: macro matters.

Model value has risen by 5.62% in the last month, so macro conditions are in favour of CRM. And the stock has lagged that improvement and currently screens as 12.08% cheap to overall macro conditions.

At the moment, the machine hasn’t triggered a bullish signal. It’s more of a case of watch eyeQ model value, and right now, it’s saying Salesforce are in good shape. The earnings report could determine if the current fiscal year is the Data Cloud year.

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.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

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