eyeQ: 10 actionable trading signals for week beginning 29 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.
29th July 2024 09:41
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
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 |
68% | 249.66p | -4.90% | |
77% | 72,84p | -7.75% | |
65% | 8338.86p | -4.39% | |
75% | 237.66p | -3.56% | |
66% | 588.37p | -1.62% | |
85% | 2791.30p | 3.75% | |
82% | 265.70p | 5.24% | |
74% | 35.17p | 12.07% | |
76% | 202.56p | 12.46% | |
81% | 484.96p | 13.40% | |
Source: eyeQ. Long Term tactical models. Data correct as at 26 July 2024.
Foxtons
The Bank of England is set to announce its latest rate decision on Thursday and it’s a very close call. There are strong arguments for the Bank doing nothing, and for them cutting the Base Rate.
The decision will be crucial for every part of UK financial markets, but perhaps the UK property sector most of all. A rate cut, combined with the new Labour government’s focus on a big building programme, should be good news for the UK property plays.
But that story has, to a large degree, already been priced in by markets. That leaves investors looking for laggards that offer attractive entry levels.
On eyeQ, Foxtons Group (LSE:FOXT)’ model value has increased sharply (16.3%) over the past four weeks. The stock has lagged that improvement and now sits 7.75% cheap to overall macro conditions.
Our smart machine hasn’t fired a signal yet, but investors should keep a close eye on this stock.
International Top 10 | |||
Company | Macro Relevance | Model Value | Fair Value Gap |
81% | $37.73 | -20.36% | |
86% | € 39.03 | -11.97% | |
67% | $230.77 | -5.88% | |
75% | $261.45 | -3.75% | |
80% | $59.48 | -2.04% | |
84% | $208.87 | 1.59% | |
76% | $119.53 | 2.11% | |
92% | $828.16 | 3.27% | |
76% | $107.28 | 8.57% | |
79% | $49.36 | 8.90% | |
Source: eyeQ. Long Term tactical models. Data correct as at 26 July 2024.
Apple
Thursday also brings Apple Inc (NASDAQ:AAPL)’s latest earnings report. Investors will be focused on iPhone sales which have faced headwinds from slowing global refresh cycles and intensifying competition in China.
Apple’s iPhone was kicked out of the top five smartphones in China by domestic smartphone rivals.
There is good news - Apple’s AI services will be available starting this autumn, fuelling hopes for an iPhone upgrade cycle.
But what’s the macro perspective? Model value increased by over 10% in the last month. Why? The dominant driver is economic growth. It explains nearly 40% of our model and accounted for around 75% of that surge in model value.
More specifically, Apple benefits from slower economic growth. At first that sounds weird. But it simply reflects Apple’s safe-haven status. It benefits when the economy slows and investors want to hide in big companies with wide moats.
And that is arguably the million-dollar question facing markets today. Over the past few weeks, the tech giants have sold off while small companies and “value” plays have rallied.
This “rotation”, as the professionals call it, will work if the US economy remains strong or manages a soft landing. A hard landing or recession will see that pattern reverse and investors flock back to the Magnificent once again.
Thursday’s earnings will be hugely important, but so too will the economic data. At nearly 6% cheap to eyeQ model value, Apple is starting to look attractive to those who fear a recession is imminent.
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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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