The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Stay overweight luxury stocks – BCA Research

In an environment of currency volatility, the luxury sector could prove to be a refuge, especially as global top-end spending appears to be holding up well, according to BCA Research.

Equity investors know that large swings in exchange rates hurt foreign demand and/or pricing of most goods and services. But compared to most sectors, luxury providers are well protected. A luxury product, almost by definition, is supposed to be expensive. In other words, demand for luxury goods has a very low (or even negative) elasticity to price. Although this sector has already outperformed during the recovery, valuations do not appear excessive. On a forward price-to-earnings basis, the sector trades in line with the broad market.

If, as we expect, sales and earnings growth continue to outstrip the rest of the market, the sector will continue to outperform.

Bottom line: Our European Investment Strategy service maintains a structural overweight relative to European equities.

This post was originally published by the BCA Research blog.

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree