eyeQ: 10 actionable trading signals for week beginning 23 September 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.
23rd September 2024 10:14
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
- 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 |
81% | 701.13p | -12.99% | |
67% | 863.33p | -8.87% | |
65% | 760.63p | -7.21% | |
68% | 400.91p | -7.19% | |
86% | 3287.39p | -4.69% | |
69% | 7979.22p | 0.51% | |
81% | 718.51p | 1.30% | |
74% | 507.81p | 2.19% | |
65% | 83.24p | 3.55% | |
69% | 305.36p | 5.40% |
Source: eyeQ. Long-term tactical models. Data correct as at 23 September 2024.
Greggs
Greggs (LSE:GRG) has been on a tear this year. The FTSE 250 company is up by 7.3% year to date, while Greggs has risen by 21.3%.
The beloved baker isn’t just opening on UK high streets, it is also targeting stations, airports and supermarkets.
On eyeQ’s smart machine, Greggs’ macro relevance score is high at 86%. Investors need to pay close attention to macro factors such as consumer behaviour amid a cost-of-living crisis, overall economic growth and credit conditions.
eyeQ model value has been rising since July – it is up by 5.72% in the last four weeks. The share price has lagged this improvement in macro conditions, leaving the stock sitting 4.69% cheap to model value.
That’s not, however, quite enough for the machine to fire a signal. Patience is required as we await still more attractive entry levels.
International Top 10
Company | Macro Relevance | Model Value | Fair Value Gap |
70% | $36.81 | -8.80% | |
71% | $137.21 | -5.78% | |
70% | $162.77 | -4.37% | |
65% | $149.25 | -2.45% | |
77% | $63.29 | -1.97% | |
74% | $28.97 | 1.55% | |
68% | $277.25 | 2.64% | |
71% | $186.44 | 2.70% | |
68% | € 6.33 | 3.41% | |
66% | $70.06 | 8.73% |
Source: eyeQ. Long-term tactical models. Data correct as at 23 September 2024
YUM Brands
Fast food has been struggling in 2024 and Yum Brands Inc (NYSE:YUM) (owner of Taco Bell, Pizza Hut and KFC) posted disappointing earnings at the end of August, adding to the sense that the cost-of-living crisis is weighing on performance. In some cases, a potential consumer backlash around events in the Middle East are an additional headwind.
But the macro picture has actually got better of late. eyeQ model value has improved in the last two weeks, driven by the Federal Reserve’s first rate cut since March 2020 and tighter credit spreads.
That means Yum sits 5.78% cheap to overall macro conditions, which is a big enough discrepancy for a bullish signal.
There are reasons for caution – some investors will emphasise struggling consumers and geopolitics, and therefore choose to overrule that signal. But at a minimum, there’s a fair amount of bad news already in the price. And, for the optimists, this could offer a cheap entry level.
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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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