eyeQ: smart machine fires bullish signal on this housebuilder
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. Now it’s identified a new trading idea in the property sector.
11th September 2024 10:31
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
Barratt Developments
Model relevance: 68%
Model Value: 532.75p
Fair Value Gap: -7.94% discount to model value
Data correct as at 11 September 2024. Please click glossary for explanation of terms. Long-term strategic model.
At the really big picture level, recent headlines have suggested it’s not the right time to be topping up any investments. UK economic growth has underwhelmed, US banks are warning that 2025 won’t be as good for them as 2024, China is experiencing prolonged disinflation and is exporting that pressure on prices around the entire world.
But if you subscribe to the old adage about “being greedy when others are fearful”, now is the time to be at least researching potential investment opportunities.
This week’s video talked about some potentially interesting entry levels for stocks that may benefit from a recovery in the UK property market. And now our smart machine has fired a bullish signal on homebuilder Barratt Developments (LSE:BDEV), which screens as almost 8% cheap to prevailing macro conditions.
The story is the same as we discussed with Savills (LSE:SVS) and Persimmon (LSE:PSN) in the video – the macro environment is holding up, moving sideways while the stock price has fallen early in September. Hence the cheap valuation on our model. Another potential idea to watch if you believe the new Labour government will shake up the UK property market for better.
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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