eyeQ: 10 actionable trading signals for week beginning 7 October 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.
7th October 2024 09:42
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 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 |
77% | 3217.51p | -11.26% | |
73% | 712.86p | -9.76% | |
8-% | 776.53p | -4.09% | |
71% | 923.78p | -1.18% | |
74% | 1824.82p | -1.04% | |
68% | 1630.44p | 1.75% | |
75% | 234.92p | 4.12% | |
69% | 83.87p | 4.15% | |
71% | 464.62p | 5.76% | |
68% | 7803.72p | 5.82% |
Source: eyeQ. Long Term tactical models. Data correct as at 6 October 2024.
Grainger
Rents are rising rapidly in the UK, the latest Office of National Statistics (ONS) research showed private rents rose 8.7% year on year in June. Grainger (LSE:GRI)’s latest financial report echoes these robust market conditions.
But the big-picture news is less friendly. eyeQ’s model value has fallen nearly 4% in the last month. Why? Mainly because Grainger wants lower inflation – presumably because that would let the Bank of England cut rates more aggressively and that would add further fuel to the UK property market.
The stock has ignored this, and it now sits 4.12% rich to overall macro condition. That prompted a bearish signal. Grainger is not an efficient way for investors to play the UK housing market at the moment.
International top 10
Company | Macro Relevance | Model Value | Fair Value Gap |
67% | € 5.52 | -4.36% | |
87% | $129.79 | -3.91% | |
77% | $29.40 | -2.88% | |
66% | $30.76 | -2.82% | |
65% | $65.97 | -1.89% | |
69% | $183.58 | 1.57% | |
71% | $46.81 | 5.01% | |
71% | $73.18 | 7.79% | |
65% | $367.98 | 9.98% | |
69% | $95.05 | 17.01% |
Source: eyeQ. Long Term tactical models. Data correct as at 6 October 2024.
RTX
After a rough 2023, RTX Corp (NYSE:RTX)’s stock is up by a staggering 41% this year. It has benefited on the commercial aerospace side from the weaknesses of its competitors Boeing Co (NYSE:BA) and Airbus SE (EURONEXT:AIR). On the defence side, sales are up due to the conflicts in the Middle East.
That said, macro news plays an important role in the stock – 87% macro relevance. And that news has been positive of late. Federal Reserve rate cuts and increased confidence in the performance of the EU economy have pushed model value up by 7.78% in the last month.
The stock is lagging this improvement in macro conditions leaving it 3.91% cheap on eyeQ’s model. That’s not yet enough for a bullish signal from our smart machine. However, with the US elections around the corner and with no resolution in the Middle East on the horizon, the stock could be a good addition.
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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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