eyeQ: a stock to fund a luxury lifestyle?
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. It's just identified a stock to watch.
17th October 2024 10:55
by Huw Roberts from eyeQ
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"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
LVMH
Macro Relevance: 72%
Model Value: €637.09
Fair Value Gap:-6.18% discount to model value
Data correct as at 17 October 2024. Please click glossary for explanation of terms. Long-term strategic model.
Lvmh Moet Hennessy Louis Vuitton SE (EURONEXT:MC) reported earnings yesterday and the news was bleak, sending the stock down around 4% which leaves it down 17% year-to-date. That also means the excitement around the Chinese stimulus package has completely unwound.
To rewind, the luxury brand has been struggling throughout 2024. A big reason for that has been the Chinese consumer, worried about the ongoing slump in the property market, has stopped buying their expensive goods. So last month, when Beijing announced rate cuts and other measures designed to kick start the economy, investors got all excited.
Chinese stocks and anything related to China (miners, resource stocks, commodities, the Australian Dollar) were all bid higher. That excitement also prompted many to chase luxury goods makers like LVMH higher. Over late September the stock rallied almost 20%.
Now, the mood music has shifted once again. Markets are fearful the stimulus measures aren’t going to be enough to rejuvenate Chinese growth. Add in disappointing earnings, and LVMH is struggling.
It is a strong company though so it is one worth monitoring for future opportunities. And, from eyeQ’s macro perspective, there are some interesting developments.
Macro relevance remains high (71%, suggesting big picture stuff is an important driver of the share price). Macro momentum is potentially trying to bottom out. Model value has fallen around 10% in the last month but it is up nearly 3% in October.
And finally this most recent sell-off has taken the stock 6.18% below where macro conditions say it “should” trade. That fair value gap is not yet big enough for our smart machine to fire a bullish signal. But it does warrant close watching.
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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