eyeQ: 10 actionable trading signals for week beginning 3 June 2024
interactive investor has 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.
3rd June 2024 11:01
by Huw Roberts from interactive investor
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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 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% | 539.03p | -17.18% | |
88% | 170.51p | -3.34% | |
92% | 2294.57p | -3.08% | |
74% | 442.32p | -1.80% | |
66% | 767.57p | -0.20% | |
84% | 2834.32p | 3.59% | |
82% | 235.91p | 5.64% | |
71% | 246.97p | 6.49% | |
78% | 720.66p | 11.03% | |
70% | 1068.98p | 14.34% | |
Source: eyeQ. Long Term tactical models. Data correct as at 3 June 2024.
International Top 10 | |||
Company | Macro Relevance | Model Value | Fair Value Gap |
82% | $368.10 | -17.98% | |
74% | € 72.45 | -9.12% | |
81% | $192.16 | -7.91% | |
72% | $187.01 | -5.29% | |
74% | $171.52 | -2.77% | |
Porsche Automobil Holding SE Vorz-Inhaber-Akt stimmrechtslos (XETRA:PAH3) | 83% | € 49.30 | 2.34% |
77% | $181.77 | 5.45% | |
91% | C$137.94 | 7.41% | |
89% | $36.56 | 8.57% | |
71% | $37.59 | 11.65% | |
Source: eyeQ. Long Term tactical models. Data correct as at 3 June 2024.
Porsche
Is China to blame for Porsche (XETRA:PAH3)’s recent speed bump?
The Chinese luxury market is weak, and Chinese brands have rapidly taken over market share. The luxury car manufacturer’s electric vehicle (EV) sales have declined and, to top that, the European Commission is considering tariffs on Chinese EVs, a measure that could lead to retaliation.
Porsche will relaunch its iconic 911 race car this summer and car enthusiasts are hoping this could trigger a rally in the stock.
So, does the eyeQ smart machine see potential in the car maker?
The smart machine gives the stock a score of 83% on model confidence (how confident we are in our smart machine’s model value), which means that investors need to watch out for the bigger picture such as what the European Central Bank (ECB) will do with interest rates.
Model value is grinding higher - it rose 1.11% last month. But while macro conditions are improving, the stock has run ahead of that and it currently sits 2.34% rich to eyeQ fair value.
That’s not enough to fire a signal but it does suggest these aren’t the best entry levels for investors.
Lululemon
The darling of the athleisure sector has continued to dazzle the market. Backed by a strong e-commerce business model, improvement in-store traffic, popular products and its ability to maintain its market share despite fierce price competition from its peers, Lululemon Athletica Inc (NASDAQ:LULU)’s momentum continues to be strong.
On eyeQ, 82% model confidence says an understanding of macro is critical.
The bad news is macro conditions are deteriorating. Model value has fallen 7.5% in the last month alone.
The good news is a lot of this is in the price already. The stock has sold off more aggressively than macro conditions warrant and it now sits 17.98% cheap to eyeQ model value.
The machine has fired a bullish signal given this valuation gap, but ideally we’d like to see model value stabilise to turn aggressively bullish.
For that to happen we need to see US inflation – the biggest single driver of our model - resume its fall back towards the Federal Reserve’s 2% target. Sticky inflation hurts consumer spending power and adds a health warning to this signal.
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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