eyeQ: this housebuilder stock is cheap
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. Now it’s spotted an appealing valuation in a popular sector.
19th November 2024 11:19
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
Persimmon
Macro Relevance: 66%
Model Value: 1,482.48p
Fair Value Gap: -17.7% discount to model value
Data correct as at 19 November 2024. Please click glossary for explanation of terms. Long-term strategic model.
Yesterday’s weekly Top 10 post highlighted Taylor Wimpey (LSE:TW.), which screens as cheap to the broad macro environment. But with eyeQ model value moving lower, our smart machine has yet to fire a bullish signal despite appealing valuations.
Persimmon (LSE:PSN) also screens as cheap – it sits nearly 18% below eyeQ model value. And, with PSN, model value has stopped falling and has now bounced in recent days.
Model value has risen from a local low of 1,440p at the end of last week to 1,482p today. eyeQ’s sister company Qi is used by professional fund managers and, for them, that three-day bounce in macro conditions is sufficient for them to consider taking action and buying the dip.
Time-poor retail investors who monitor markets less closely, may want to wait a little longer to see if this improvement in the macro environment continues.
But the basic point holds. After nearly two months when macro conditions were deteriorating, things may be changing.
Perhaps the wait for the Budget is finally over. Maybe, even with money markets discounting less rate cuts from the Bank of England, the uncertainty around the UK’s fiscal outlook has cleared and the homebuilders’ sector can move on to focus on new stories, including possibly a green light for more building projects.
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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