eyeQ: bullish on a UK share and ‘Trump trade’
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. Here’s what it makes of this FTSE 100 stock.
16th July 2024 10:09
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
Anglo American
Trading signal: long-term strategic model
Model value:2,636.46p
Fair Value Gap: -12.89% discount to model value
Model relevance: 70%
Data correct as at 16 July 2024. Please click glossary for explanation of terms.
Anglo American (LSE:AAL) has endured some bad headlines recently.
After the takeover bid from BHP Group Ltd (LSE:BHP) failed, AAL’s leadership were looking for ways to streamline their business. But a fire at its Grosvenor site in Queensland, Australia, could take the coal mine offline until 2025. That also threatens plans to sell its metallurgical coal division.
Those headlines might explain why investors have been distracted by company news and missed the improvement in macro conditions. Anglo American is back in a macro regime for the first time since December, and model value has risen 18% since late June.
The fact that Anglo’s share price hasn’t responded leaves it nearly 13% cheap on eyeQ’s model, which has now fired a bullish signal.
The hot topic currently is the idea of a “red wave” . Not only that Trump’s chances of winning the White House have improved, but that the Republicans could achieve a clean sweep, winning the House and the Senate too.
There are lots of different “Trump trades” out there, but most revolve around the idea that his policies (tariffs, trade wars, tax cuts, a new Federal Reserve chair) will be inflationary. If you believe in that scenario then real assets should do well. Commodities and resource stocks such as Anglo American should be on your shopping list.
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
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 (macro) 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.
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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.
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