eyeQ: 10 actionable trading signals for week beginning 18 November 2024

"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.

Source: eyeQ. Long Term tactical models. Data correct as at 17 November 2024.

Taylor Wimpey

UK homebuilder Taylor Wimpey (LSE:TW.) screens as 12.54% cheap to overall macro conditions, which is a big enough Valuation Gap to fire a bullish signal. But eyeQ model value is trending lower - it’s fallen 7.55% in the last month.

Put another way, the macro environment is getting worse for the stock, so even though it’s cheap on our metrics, it’s too soon to buy the dip from a macro perspective.

International top 10

Source: eyeQ. Long Term tactical models. Data correct as at 17 November 2024.

Merck

Pharmaceutical stocks are slumping on Donald Trump’s decision to appoint vaccine sceptic Robert Kennedy Jnr to a top role on US health policy.

Healthcare stocks fell broadly, with vaccine manufacturers taking the brunt of the losses. Merck & Co Inc (NYSE:MRK) sold off more than 3% on Friday in light of the appointment.

Companies fear Kennedy might obstruct the approval of new drugs and discontinue vaccines for patients on Medicare.

On eyeQ, Merck is back in regime for the first time since July. The latest sell-off leaves the stock 11.22% cheap to macro conditions. That would be a big enough Valuation Gap to fire a bullish signal except for the fact that the macro environment is deteriorating sharply: since the Federal Reserve’s 50 basis point rate cut in mid-September, eyeQ model value has fallen 16.7%.

This is a situation where a fair amount of bad news is in the price but that alone is not sufficient for us to turn bullish. We need to see eyeQ model value turn up, showing that macro conditions for the stock are improving.